This paper derives a second-order approximation to the solution of a general class of discrete- time rational expectations models. The main theoretical contribution of the paper is to show that for any model belonging to the general class considered, the coefficients on the terms linear and...

Dynamic optimizing models with an IS-LM-type structure and slow price adjustments have been used for much recent monetary policy analysis, but usually with capital and investment treated as exogenous a significant restriction. This paper demonstrates that investment decisions can be endogenized...

This paper develops a multi-agent dynamic model of the commercial aircraft industry and then uses that model to analyze industry pricing, industry performance, and optimal industry policy. In the model, firms are differentiated in their products and cost structure, and entry, exit, prices, and...

Its conceptual appeal has made the Conditional Value at Risk (CoVaR) one of the most influential systemic risk indicators. Despite its popularity, an outstanding methodological challenge may hamper the CoVaRs’ accuracy in measuring the time-series dimension of systemic risk. The dynamics of...

We study centralized dynamic matching markets with finitely many agent types and heterogeneous match values. A network topology describes the pairs of agent types that can form a match and the value generated from each match.A matching policy is hindsight optimal if the policy can (nearly)...

This paper illustrates the role for macroeconomic policy coordination when interdependent economies are pursuing disinflationary policies. Under flexible exchangerates, policy makers have an incentive to reduce inflation by pursuing contractionary policies that yield a currency appreciation. In...

We introduce evolutionary dynamics for two-action games where agents with diverse preferences use statistical inference to guide their behavior. In each period, agents are randomly selected to revise actions. They draw a random sample of other agents’ actions, use statistical inference to...

In many empirical studies, the states that are relevant for economic agents to make decisions may not be included in the data to which researchers have access. This problem often arises in the context of monotone industries. In this paper, we develop the sharp identified sets of structural...

The ‘curse of dimensionality’ is a common problem in the estimation of dynamic models: as models get more complex, the computational cost of solving these models rises exponentially. Keane and Wolpin (1994) proposed a method for addressing this problem in finite-horizon dynamic discrete...