Aggregate consumption Euler equations fit financial asset return data poorly. But they fit the return on the capital stock well, which leads us to three empirical findings relating to the capital income tax burden. First, capital taxation drives a wedge between consumption growth and the...

This paper compares different methods for estimating forward-looking output and inflation Euler equations and shows that weak identification can be an issue in conventional GMM estimation. The authors propose a GMM procedure that imposes the dynamic constraints implied by the forward-looking...

There is growing support for taxes on short-term capital inflows in emerging markets, such as the encaje adopted by Chile from 1991-98. Previous empirical assessments of the encaje conclude that it may have generated some small economic benefits, such as shifting the composition of capital...

New Keynesian macroeconomic models have generally emphasized that expectations of future output are a key factor in determining current output. The theoretical motivation for such forward-looking behavior relies on a straightforward generalization of the well-known Euler equation for...

In this article, we propose a computational method for solving the Lighthill–Whitham–Richards (LWR) partial differential equation (PDE) semi-analytically for arbitrary piecewise-constant initial and boundary conditions, and for arbitrary concave fundamental diagrams. With these assumptions,...

Previous tests for liquidity constraints using consumption Euler equations have frequently split the sample on the basis of wealth arguing that low wealth consumers are more likely to be constrained. We propose alternative tests using different and more direct information on borrowing...