We show that the preferences suggested by Greenwood, Hercowitz and Huffman (GHH), which are quite common in real business cycle (RBC) models of small open economies, are not suited for reproducing both the business cycle and the equity premium facts of a small open economy. We show that by...

In this chapter, we analyze the information content of data on inflationary expectations derived from the Israeli bond market. The results indicate that these expectations are unbiased and efficient with respect to the variables considered. In other words, we cannot reject the hypothesis that...