Extant solutions for state-contingent process switching use first-passage time densities or differential equations. We alternatively employ transition probabilities. These conditional likelihood functions also have obvious appeal for econometric analyses as well as derivative pricing and...

We formulate a stochastic, rational-expectations model of exchange rate determination, in which there are random shocks to the process of sluggish price adjustment. We examine the effects of imposing limits upon the range of variation of both nominal and real exchange rates and describe the...

Deviations from ergodicity in fundamentals may give rise to apparent bubbles (non-stationary residuals) in time series models of asset prices if an econometrician is unaware of them. This paper examines a number of such deviations in the form of expected, future, regime changes and explicitly...