We provide a conceptual framework to analysis counterfactual scenarios using macroeconometric models. We consider UK entry to the euro. We derive conditional probability distributions for the difference between the future realisations of variables of interest subject to UK entry restrictions...

This paper proposes a modified version of Swamy’s test of slope homogeneity for panel data models where the cross section dimension (N) could be large relative to the time series dimension (T). We exploit the cross section dispersion of individual slopes weighted by their relative precision....

We study the joint determination of corruption and economic growth. Our model can generate multiple equilibria when complementarity between corruption and growth is sufficiently strong. Our estimates of the impact of corruption on growth take into account that corruption is endogenous and that...

Despite the recent trend towards greater transparency of monetary policy, in many respects central bankers still prefer to speak with mystique. This paper shows that the resulting perception of ambiguity could be desirable. Under the plausible assumption that there is imperfect common knowledge...

The purpose of this paper is to present a rank based approach to cross-sectional linear factor modelling. The emphasis is on approximating factor exposures in a consistent manner in order to facilitate the merging of subjective information (from professional investors) with objective information...

Model uncertainty arises from uncertainty about correct economic theories, data issues and empirical specification problems. This paper investigates mutual dependence or jointness among variables in explaining the dependent variable. Jointness departs from univariate measures of variable...

We consider forecasting and prequential (predictive sequential) validation of meta-elliptical distributions with time varying parameters. Using the weak prequential principle of Dawid, we conduct model validation avoiding nuisance parameters problems. Results rely on the structure of...

The German energy industries will be subjected to regulation of network access enforced by a sector-specific regulator. Whereas the gas industry broke the regime of negotiated third party access, in electricity nTPA ‘worked’, although it clearly resulted in a margin squeeze. The government...

In theory the potential for credit risk diversification for banks could be substantial. Portfolio diversification is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the...

This paper generalises the approach taken by Dasgupta & Maskin (1986) and Simon (1989) and provides necessary and sufficient conditions for the existence of pure and mixed strategy Nash equilibrium in games with continuous strategy spaces and discontinuous payoff functions. The conditions can be...