This paper compares a number of alternative specifications for price setting in the context of the Smets-Wouters (2003) Dynamic Stochastic General Equilibrium model. We compare the Calvo model with a standard Taylor contracting model and show that by allowing for sector-specific capital the...

The stock market crash in 1929 has raised many discussions about the causes and the ways to prevent the financial markets from large fluctuations. The role of the margin loan has usually been regarded as the source of instability in financial markets. The view that low margin infused excessive...

We construct a general equilibrium New-Keynesian model in which firms differ in characteristics such as size, book value, sensitivity to market demand and degree of price stickiness. This establishes an explicit economic relation between firm level characteristics and the relationship between...

This paper studies the effect of imperfect information on aggregate output and price dynamics. I argue that imperfect information can lead monetary shocks to have persistent real effects. In the environment with unobserved aggregate (monetary) and real demand shocks, price-setting agents face...

The paper implements reverse shooting to solve for global nonlinear saddle path for optimal control problems with two state variables. It shows how to do reverse shooting. This will reduce entry barriers for researchers for whom this technique may be useful. For this purpose, user-friendly...

We present a quantitative analysis of the effects of population aging and pension reform on international capital markets. First, demographic change alters the time path of aggregate savings within each country. Second, this process may be amplified when a pension reform shifts old-age provision...

In this paper we examine the impact of noisy earnings signals on the equity premium. The motivation for the model is that many agents make current investment decisions based upon IBIS reports that are later revised to actual earnings reports. Agents know that the earnings forecasts are less...

This paper analyzes a general-equilibrium model of a heterogeneous agents economy in which the agents are subject to borrowing constraints and uninsurable idiosyncratic production risk. In particular, it addresses the impact of these frictions for aggregate capital accumulation. In contrast to...

In this paper, an agent-based computational capital asset pricing model is applied to address an issue, known as the elasticity puzzle, originating from a famous reciprocal relation between the elasticity of intertemporal substitution (EIS) and the relative risk aversion (RRA) coefficient. By...

Firm-level stock volatility has increased significantly since 1962 and varies widely across industries. Recent literature shows that the excessive and persistent stock volatility can be well explained by fundamental uncertainties. This paper conducted panel data analyses on 415 firms during...