Gibrat's Law of proportionate effect, as applied to firms, states that the growth rate of a firm is independent of its size. Empirical work on firm dynamics finds crucial deviations from Gibrat's Law such as smaller firms growing faster than larger firms (Evans, 1987, and Hall, 1987), a negative...

In this paper we study a local version of the Minority Game where agents are placed on the nodes of a directed graph. Agents care about beingin the minority of the group of agents they are currently linked to and employ myopic best-reply rules to choose their next-period state. We show that, in...

For modelling economic and financial time series, multivariate linear and nonlinear systems of equations have become a standard tool. These models can also be applied to non-stationary processes. However, the resulting finite-sample estimates may depend strongly on the specification of the model...

This paper contrasts the effects of tied and untied foreign aid programs on the welfare and macroeconomic performance of a small open economy. We show that the acceptance of tied aid inevitably obligates the recipient economy to undertake certain internal structural adjustments, and the...

We analyze a new panel data set that includes balance sheet information, measures of expected default risk, and credit spreads on publicly-traded debt for more than 900 firms over the period 1997Q1 through 2003Q3. We obtain precise time-specific estimates of the financial frictions parameter...

The fact that expected payoffs on assets and call options are infinite under most log-stable distributions led both Paul Samuelson (as quoted by Smith 1976) and Robert Merton (1976) to conjecture that assets and derivatives could not be reasonably priced under these distributions, despite their...

We model a simple communication network model for the evolution of heterogeneous beliefs in an overlapping generation economy. Each agent gathers information from his contacts and forms an inflation forecast based on this information, using the belief generating procedures. When the actual...

This paper investigates the empirical relevance of a new framework for monetary policy analysis in which the decision makers are allowed to weight differently positive and negative deviations of inflation and output from the target values. Reduced-form and structural estimates of the central...

The purpose of this paper is to examine the optimality of the monetary authorities reaction function in the two-area medium size model MARCOS (US and euro areas). The parameters and the horizons of output gap and inflation expectations of the Taylor rule are computed in order to minimise a loss...

This paper proposes a new empirical representation of US inflation expectations in a Stace-Space Markov-Switching framework in order to identify the expectations regimes which are associated with short and long term Phillips curves. We explicitly identify the dynamic of inflation expectation...