Due to the use of distortionary taxation, many believe that real-world economies should attain a lower level of public expenditures than one might suspect from the analysis of artificial models where lump-sum taxes are assumed to be available. The paper examines this popular hypothesis by means...

We study endogenous currency substitution in a decentralized trade environment. Sellers maximize profits from sales of imperfectly substitutable goods by posting prices in either one of two currencies. A unique symmetric equilibrium exists where goods are priced only in the local currency. This...

Macroeconomics has a long tradition of inspecting and interpreting patterns in graphs of aggregate data. However, the move towards more precise quantification of macroeconomic phenomena has seen academics shift away from a study of turning points, which are a natural and obvious way of...

No abstract.

This paper collects new evidence on the monetary transmission mechanism. This evidence is obtained from the study of the effects that unexpected monetary policy shocks exert on the activity of the manufacturing sectors in 5 OECD countries (France, Germany, Italy, UK and USA). The goal is...

The paper considers the sources of forecast errors and their consequences in an evolving economy subject to structural breaks,forecasting from mis-specified, data-based models. A model-free taxonomy of forecast errors highlights that deterministic shifts are a major cause of systematic forecast...

We study a model in which heterogenous boundedly rational agents interact locally in order to play a coordination game. Agents differ in their mobility with mobile agents being able to relocate within a country. The model yields the following predictions: (1) mobile agents always benefit from...

We are interested in estimating the average effect of a binary treatment on a scalar outcome. If assignment to the treatment is independent of the potential outcomes given pre-treatment variables, biases associated with simple treatment-control average comparisons can be removed by adjusting for...

The construction of prediction intervals and regions and their probability content for nonlinear systems with nonparametric disturbances is considered. The semiparametric efficiency bound for estimating the probability content of a known interval (region) and estimators that attain the bound are...

We study games with strategic complementarities, arbitrary numbers of players and actions, and slightly noisy payoff signals. We prove limit uniqueness: as the signal noise vanishes, the incomplete information game has a unique strategy profile that survives iterative dominance. This generalizes...