In many dynamic programming problems, a mix of state variables exists - some exhibiting stochastic cycles and others having deterministic cycles. We derive a formula for the value function in infinite-horizon, stationary, Markovian decision problems by exploiting a special partitioned-circulant...

I show that a standard RBC-model can be used to explain why hours per capita decrease in response to a permanent technology shock when hours enter a vector autoregressive (VAR) in first differences and why hours increase when hours enter in levels. There are two parts to my argument. First,...

Fund managers respond to the payoff gradient by continuously adjusting leverage in our analytic and simulation models. The base model has a stable equilibrium with classic properties. However, bubbles and crashes occur in extended models incorporating an endogenous market risk premium based on...

During the first half of the 20th century the length of the workweek in the U.S. declined, and its distribution across wage deciles narrowed. The hypothesis is twofold. First, technological progress, through the rise in wages and the decreasing cost of recreation, made it possible for the...

The paper suggests an optimal control model to determine optimal pricing and advertising policies for a one-time entertainment event. There are two periods, an initial period of regular price sales and a terminal period of last-minute sales at a (possibly) reduced price. The price in a period is...

We examine the role of money in three environments: the New Keynesian model with separable utility and static money demand; a nonseparable utility variant with habit formation; and a version with adjustment costs for holding real balances. The last two variants imply forward-looking behavior of...

We extend Lubik and Schorfheide's [2004. Testing for indeterminacy: an application to U.S. monetary policy. American Economic Review 94, 190-217] likelihood-based estimation of dynamic stochastic general equilibrium (DSGE) models under indeterminacy to encompass a sample period the includes both...

Contrary to standard theoretical reasoning, recent empirical research shows that financial integration is associated with higher consumption volatility in developing countries. This paper illustrates how domestic credit market imperfections can alter the standard predictions about the...

We study the effects of stylized demographic and fiscal shocks on the macroeconomic performance of an industrialized small open economy. We construct an overlapping-generations model which incorporates a realistic description of the mortality process. Agents engage in educational activities at...

This paper examines the valuation of American chooser options, i.e., American-style contracts written on the maximum of an American put and an American call. The structure of the immediate exercise region is examined. The early exercise premium representation of the chooser's price is derived...