This paper describes a new continuous-time principal-agent model, in which the output is a diffusion process with drift determined by the agent’s unobserved effort. The risk-averse agent receives consumption continuously. An optimal contract, based on the agent’s continuation value...

Sociodynamics is an interdisciplinary attempt to study the dynamics of complex systems within the conceptual frame of subjects spanning biology, sociology, politics, history, economy and other sciences. For this purpose, the agent based computer simulation Sociodynamica has been developed to...

Uncertainty about the persistence of periods characterized by large price shocks is an important aspect of monetary policy. This type of uncertainty posed some difficulties for central banks in 2004. This paper formalizes the treatment of this type of uncertainty by solving an optimal control...

Most recent studies of dynamic macroeconomic relationships focus on models derived from optimising behaviour by economic agents. In most of these models, the eigenvalues of the associated dynamical system are real-valued and so the time-path of the system exhibits monotonic or near-monotonic...

This paper examines a recent shift in the dynamics of the term structure and interest rate risk. We first use standard yield-spread regressions to document such a shift in the U.S. in the mid-1980s. Over the pre- and post-shift subsamples, we then estimate dynamic, affine, no-arbitrage models,...

Previous efforts to compare the costs and benefits of fixed versus flexible exchange rate regimes have ignored the fact that it takes significant resources and time to develop export markets, and they have not included an analysis of the firm-level decision to enter or exit export markets. This...

This paper studies the dynamics of six major exchange rates, and runs formal tests to distinguish among different types of nonlinearities. In particular we study exchange rate returns, normalized exchange rates and exchange rate volatilities, classifying these series using BDS test, correlation...

In the U.S., the bulk of CO2 abatement induced by carbon taxes comes from electric power. This paper incorporates technology detail into the electricity sector of a computable general equilibrium model of the U.S. economy to characterize electric power’s technological margins of...

A combination of observed and unobserved (latent) factors capture term structure dynamics. Information about these dynamics is extracted from observed factors without specifying or estimating any of the parameters associated with latent factors. Estimation is equivalent to fitting the moment...

This paper develops and illustrates the multi-step generalization of the standard single-step perturbation (SSP) method or MSP. In SSP, we can think of evaluating at x the computed approximate solution based on x0, as moving from x0 to x in "one big step" along the straight-line vector x-x0. By...