We test whether dividend taxes affect corporate investments. We exploit Sweden's 2006 dividend tax cut of 10 percentage points for closely held corporations and five percentage points for widely held corporations. Using rich administrative panel data and triple-difference estimators, we find...

Common integrated assessment models produce the counterintuitive result that higher risk aversion does not lead to stronger near-term abatement. This paper re-examines this result with a DICE model that is fully coupled with a thermohaline circulation model. It also features Epstein-Zin utility...

The transition paths from plan to market have varied markedly across countries. Central and Eastern European and the Baltic countries, which opted for a fast and profound transformation of their institutions including business climates, rapidly narrowed the productivity gap with advanced...

In this paper we use the property that certainty equivalence, as implied by a first-order approximation to the solution of stochastic discrete-time models, breaks in its equivalent continuous-time version. We study the extent to which a first-order approximated solution built by perturbation...

We argue that deep learning provides a promising avenue for taming the curse of dimensionality in quantitative economics. We begin by exploring the unique challenges posed by solving dynamic equilibrium models, especially the feedback loop between individual agents’ decisions and the aggregate...

We postulate a nonlinear DSGE model with a financial sector and heterogeneous households. In our model, the interaction between the supply of bonds by the financial sector and the precautionary demand for bonds by households produces significant endogenous aggregate risk. This risk induces an...

A healthy financial system encourages the efficient allocation of capital and risk. The collapse of the house price bubble led to the financial crisis that started in 2007. There is a large empirical literature concerning the relation between asset price bubbles and financial crises. I evaluate...

This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...

We study the interplay between tenure decisions, stock market investment and the public social security system. Housing equity not only serves a dual purpose as a consumption good and as an asset, but also provides insurance to buffer various risks in retirement. Our life cycle model captures...

This paper introduces the probabilistic formulation of continuous-time economic models: forward stochastic differential equations (SDE) govern the dynamics of backward-looking variables, and backward SDEs capture that of forward-looking variables. Deep learning streamlines the search for the...