We present a new approach to the approximation of equilibrium solutions to nonlinear rational expectations models that applies to any order of approximation. The approach relies on a particular version of Taylor series approximations-the differential version-and on a scalar perturbation of the...

We present a new approach to the approximation of equilibrium solutions to nonlinear rational expectations models that applies to any order of approximation. The approach relies on a particular version of Taylor series approximations - the differential version - and on a scalar perturbation of...

The untested assumption of linear relationship between stocks and bonds in previous empirical studies may lead to an invalid conclusion if the actual relationship is non-linear. The emphasis of this paper is on the effect of non-linearities on causal relationships between stocks and bonds in the...

Total factor productivity (TFP) computed as Solow-residuals could be subject to input-substitution bias for two reasons. First, the Cobb-Douglas (CD) production function restricts all input substitutions to one. Second, observed inputs generally differ from optimal inputs, so that inputs...

We develop a new method to approximate the asymmetric multivariate probability density function (pdf) of financial asset returns by using series expansions; a rate of convergence for the mean absolute error of this approximation is also provided. We then propose the method of maximum likelihood...