Default prior choices fixing Zellner's g are predominant in the Bayesian Model Averaging literature, but tend to concentrate posterior mass on a tiny set of models. The paper demonstrates this supermodel effect and proposes to address it by a hyper-g prior, whose data-dependent shrinkage adapts...

Monetary policy in the euro area is conducted within a multicountry, multicultural, and multilingual context involving multiple central banking traditions. How does this heterogeneity affect the ability of economic agents to understand and to anticipate monetary policy by the European Central...

This paper evaluates the bias of the least-squares-with-dummy-variables (LSDV) method in fiscal reaction function estimations. A growing number of studies estimate fiscal policy reaction functions-that is, relationships between the primary fiscal balance and its determinants, including public...

This paper investigates whether the linkages between economic growth in Russia and growth in other countries in the region have weakened over time, particularly following the 1998 Russian crisis. It specifies an econometric model that includes standard growth determinants as well as Russian...

Despite the liberalization of foreign portfolio investment around the globe since the early 1980s, the home-bias phenomenon is still found to exist. Using a relatively new IMF survey dataset of cross-border equity holdings, this paper tests new structural equations from a consumption-based...

This paper examines the relationship between adherence to international standards of good practice in policy-making and two key indicators of access to capital markets and the cost of this access: spreads and sovereign ratings. In contrast to other work, this study reviews a broad set of...

This paper reviews recent advances in the specification and estimation of Bayesian Vector Autoregressive models (BVARs). After describing the Bayesian principle of estimation, we first present the methodology originally developed by Litterman (1986) and Doan et al. (1984) and review alternative...

This paper extends Grossman and Helpman’s seminal work (1991), and presents an endogenous growth model where innovations created in a high-tech sector may be assimilated or adapted by a low-tech sector. Applying a simple Heckscher-Ohlin framework, the effects of technological diffusion are...