Alternative Inflation Target monetary policies have been usually studied under the perfect foresight hypothesis. We consider such monetary policies in a bounded rationality framework. In this case, we can distinguish two different scenarios. It is possible to assume bounded rationality only from...

Consider the discrete-time state equation and feedback control rule (1) x(t) = Fx(t-1) + Gu(t) + e(t), (2) u(t) = Px(t-1), where x is an nx1 state vector, u is an mx1 control variable, and e is an nx1 disturbance distributed NIID(0,S), F and G are nxn and nxm parameter matrices, and P is an mxn...

This paper shows how a forward-shooting algorithm can be easily implemented using the Matlab programming language. In the paper we develop and implement a forward-shooting numerical algorithm for computing the dynamics of a small representative agent macroeconomic model when subjected to an...

In modern risk management the notion of correlation is central. Essentially, correlation is used to measure dependence between risks assuming multivariate normally distributed returns, but the inclusion of non-derivative products invalidates many of the distributional assumptions underlying the...

This paper analyzes the process of social aggregation in an environment in which there are agents with different endowments that can form coalition to produce and divide an output; there is an aggregation force determined by an increasing returns to scale technology, but imperfect information on...

Any mapping that has the same sign as the conditional mean of returns is a risk neutral investor's best predictor so it may be difficult to estimate the conditional mean yet easy to estimate a `risk neutral best predictor'. An asymptotically consistent estimator for risk neutral best predictors...

The present paper studies first-best solutions to the aggregative model of growth with externalities. Pareto-efficient accumulation paths are the result of policy measures that correct externalities. We show that there exist non-constant periodic solutions as a subclass of first-best paths. In...

Monetary authorities in many industrialised countries have some form of price stability as their central objective. Because of the significant lags between policy actions and their subsequent impact on prices, policymakers must rely on indicators of future price pressure to guide current policy...

In this paper, we aim at computing a long run Value at Risk for a portfolio of different assets and derivatives. The main innovation of the computation is to take into account a modelling of the systematic risk, which is shared by the different components of the portfolio. More precisely, we...

This paper is concerned with the development of computationally efficient algorithms for the solution of the dynamics of macroeconomic models. The paper focuses on a particular continuous-time macroeconomic model. In the paper we exploit the model structure to improve the efficiency of solving...