We study a market search equilibrium with aggregate uncertainty, private information and heterogeneus beiefs. Traders initially start out optimistic and then update their beliefs based on their matching experience in the market, using the Bayes rule. It is shown that all separating equilibria...

The performance of a kernel HAC estimator depends on the accuracy of the estimation of the normalized curvature, an unknown quantity in the optimal bandwidth represented as the spectral density and its derivative. This paper proposes to estimate it with a general class of kernels. The AMSE of...

In macroeconomics, life-cycle models are typically used to address exclusively life-cycle issues. This paper shows that modeling the life-cycle may be important when addressing public policy issues, in this case the welfare costs of inflation. In the representative agent model, the optimal...

The finite state Markov-Chain approximation method developed by Tauchen (1986) and Tauchen and Hussey (1991) is widely used in economics, finance and econometrics in solving for functional equations where state variables follow an autoregressive process. For highly persistent processes, the...

I study strategic information transmission when biases are uncertain. A perfectly informed expert advises a decision maker. The expert has biases with direction unknown to the decision maker. I show that all equilibria are of partitional form as identified by Crawford and Sobel (1982). It never...

This paper formulates Rosenberg's (1982) "learning by using" as a stochastic process. The producer of machines learns from the experience of users. Due to this learning, the quality of machines improves over time. It turns out that the process of this improvement approximately takes an...

This paper examines the causes of the observed increase in the average unemployment duration over the past thirty years. First we analyze if changes in the demographic com- position of the U.S. labor force can explain this increase. In particular, we examine how much of the observed change can...

We study incentive issues related to two-sided one-to-one stable matching problem after weakening the notion of strategy-proofness to Ordinal Bayesian Incentive Compatibility (OBIC). Under OBIC, truthtelling is required to maximize the expected utility of every agent, expected utility being...

Tax-based deficit reduction experiments for the U.S.\@ and EMU-12 are conducted using an open economy model. In welfare terms, raising the consumption tax is the least costly, followed by the labor income tax, then the capital income tax. Use of an open economy model means that the incidence of...