We analyze the impact of damage uncertainty on optimal mitigation policies in the integrated assessment of climate change. Usually, these models analyzeuncertainty by averaging deterministic paths. In contrast, we build a consistentmodel deriving optimal policy rules under persistent...

The paper introduces a new notion of risk aversion that is independent of the good under observation and its measure scale. The representational framework builds on a time consistent combination of additive separability on certain consumption paths and the von Neumann & Morgenstern (1944)...

We compare local and global polynomial solution methods for DSGE models with Epstein- Zin-Weil utility. We show that model implications for macroeconomic quantities are relatively invariant to choice of solution method but that a global method can yield substantial improve- ments for asset...

We provide explicit solutions to life-cycle utility maximization problems simultaneously involving dynamic decisions on investments in stocks and bonds, consumption of perishable goods, and the rental and the ownership of residential real estate. House prices, stock prices, interest rates, and...

The central puzzles in financial economics commonly include violations of the expectations hypotheses, predictability of excess returns, and the levels and volatilities of nominal bond yields, in addition to well-known equity premium and the risk-free rate puzzles. Equally surprising is the...