In this paper, we investigate the sources of heterogeneity within the euro area. For this purpose, we build an optimization-based multi-country model (MCM) that allows different sources of heterogeneity across countries, both in terms of behavior of economic agents and in terms of asymmetry of...

This paper estimates a two-country model with a global bank, using US and Euro Area (EA) data, and Bayesian methods. The estimated model matches key US and EA business cycle statistics. Empirically, a model version with a bank capital requirement outperforms a structure without such a...

This paper develops methods to study the evolution of agents’ expectations and uncertainty in general equilibrium models. A central insight consists of recognizing that the evolution of agents' beliefs can be captured by defining a set of regimes that are characterized by the degree of agents'...

This paper provides a concise primer on the estimation of constant gain learning models. One practical concern in the estimation procedure is the initialization of the learning parameters. The popular approach in the literature relies on a training sample to estimate these quantities. We also...

Modern Bayesian tools aided by MCMC techniques allow researchers to estimate models with increasingly intricate dynamics. This paper highlights the application of these tools with an empirical assessment of optimal versus operational monetary policy rules within a standard New Keynesian...

A Bayesian variable selection procedure is used to control for uncertainty in the specification of a recreational demand model. Specifically, we propose a model that draws on the Bayesian paradigm to integrate the variable selection process into model estimation and to reflect the accompanying...

We argue that the failure to disentangle the evolution of the Canadian currency from the U.S. currency leads to potentially incorrect conclusions regarding the case of Dutch disease in Canada. We propose a new approach that is aimed at extracting both currency components and energy- and...

We evaluate predictive regressions that explicitly consider the time-variation of coefficients in a comprehensive Bayesian framework. For monthly returns of the S&P 500 index, we demonstrate statistical as well as economic evidence of out-of-sample predictability: relative to an investor using...

This paper develops methods to study the evolution of agents’ expectations and uncertainty in general equilibrium models. A central insight consists of recognizing that the evolution of agents. beliefs can be captured by defining a set of regimes that are characterized by the degree of agents....