The paper argues that a Cobb-Douglas specification may be a reasonable description of the Finnish aggregate production function when a sufficiently long time period (the 20th century) is considered. It is, however, a misleading description of the production technology for the post-WWII period....

In order to explore how credit ratings may affect financial markets, we analyze a global game model of debt roll-over in which heterogeneous investors act strategically. We find that the addition of the rating agency has a non-monotonic effect on the probability of default and the magnitude of...

We develop a general equilibrium monetary model of endogenous specialization and international trade to examine the degree of specialization and trade volume under alternative monetary systems, a multiple currency system with a flexible exchange rate and a common currency system. Where demand...

In this paper, we empirically examine the portfolio-rebalancing effects stemming from the policy of "quantitative monetary easing" recently undertaken by the Bank of Japan when the nominal short-term interest rate was virtually at zero. Portfolio-rebalancing effects resulting from the open...

Jovanovic and Ueda (1997) consider a principal-agent model with moral hazard and renegotiation. A noisy signal of the agent's output is observed before renegotiation takes place and actual output is revealed after renegotiation. If the agent is restricted to choose pure strategies it can be...

The federal funds rate is featured by frequent, small changes in the same direction and infrequent reversals. How to replicate the observed smooth behavior of the federal funds rate with a small scale macroeconomic model? This paper compares the descriptive performance of an empirical fully...

This paper estimates a standard version of the New Keynesian monetary (NKM) model under alternative specifications of the monetary policy rule using U.S. and Eurozone data. The estimation procedure implemented is a classical method based on the indirect inference principle. An unrestricted VAR...

Although a lot has been written on the link between debt maturity and financial crises, it remains puzzling why the private sector in emerging market economies holds such a large share of short-term debt in the presence of substantial macroeconomic risk. To understand this phenomenon, we propose...

We construct an overlapping generations model to study the effect of capital controls on human capital investments and the incidence of redistributive taxation in a growing economy. We argue that the conventional wisdom linking higher capital controls to lower growth is reproduced only when an...

We examine bank lending decisions in an economy with spillover effects in the creation of new investment opportunities and asymmetric information in credit markets. We examine price-setting equilibria with horizontally differentiated banks. If bank lending takes place under a weak corporate...