In this paper we analyse the effect of model uncertainty on the wealth and utility outcomes of an investment decision. We compute optimal portfolio weights for domestic and foreign assets and using these weights we construct end investment horizon wealth and utility ratios. Model uncertainty is...

We estimate a small open economy DSGE model for the euro area. The household sector optimises an intertemporal utility function with habit persistence. Households decide about asset accumulation, consumption and sets wages in a monopolistically competitive labour market. Households trade bonds...