The paper demonstrates how the E-stability principle introduced by Evans and Honkapohja [2001. Learning and Expectations in Macroeconomics. Princeton University Press, Princeton, NJ] can be applied to models with heterogeneous and private information in order to assess the stability of rational...

We explore the timing of the replacement of a manager as an important incentive mechanism, using a real options approach in a situation where the timing of the decision to replace the manager is related to a major change in a firm's strategies that involves spending large amounts of various sunk...

This paper examines the quantitative relationship between the elasticity of capital-labor substitution in production and the conditions needed for equilibrium indeterminacy (and belief-driven fluctuations) in a one-sector growth model. With variable capital utilization, the substitution...

How to quantify estimation risk is important in portfolio selection. For this purpose we derive the flexible shrinkage estimator for the optimal portfolio weights, which allows dynamic adjustments of model structure. Our estimator is based on grouping the assets in order to capture...

We study Markov-perfect Nash equilibria (MPNE) of a Ramsey-Cass-Koopmans economy in which households are aware of their influence on prices. The Ramsey conjecture fails to hold such that households other than the most patient one own positive wealth in the steady state. This confirms results...

Algorithms are presented for computing mean square errors in a misspecified unobserved components model when the true model is known. It is assumed that both the true and misspecified models can be put in linear state space form. The algorithm for filtering is based on the Kalman filter while...

Corchón and Mas-Colell [1996. On the stability of best reply and gradient systems with applications to imperfectly competitive models. Economics Letters 51, 59-65] showed that in heterogeneous oligopoly (almost) everything is possible. In order to obtain a similar result for homogeneous...

This paper studies a monetary model that is standard in all respects except that market participants have incomplete knowledge about the economic structure and employ adaptive learning rules to learn about the economic environment. Market participants also must contend with unannounced regime...

In this paper we consider the implications of relative consumption externalities in the Blanchard-Yaari overlapping generations framework. Unlike most of the macroeconomic literature that studies this question, the differences between agents, and, thus, in their relative position, persist in...