The notion of optimized rational behavior in the formation of expectations is used in this note to study the dynamics of a simple macroeconomic model. In a setting where departures from stability are not possible under perfect foresight, the selection of an optimal degree of rationality may lead...

We show that the specification of technology differences in recent empirical studies of trade is not supported by basic growth theory and may lead to biased estimates of the pattern of specialization and trade.

A large class of stochastic OLG economies with nonclassical production is shown to possess a unique Markov Equilibrium (ME) which is also the unique sequential equilibrium. Additional properties such as monotonicity, continuity, and smoothness of the ME are also discussed.

According to Kim and Lee (1997), property taxes as opposed to capital gain taxes and taxes on rent endanger dynamic efficiency. The present paper shows that the choice of the tax base is immaterial. What counts is whether the taxes eliminate the after-tax rent. Empirical evidence suggests that...

We introduce new definition and estimation procedures of trade benefit functions that allow researchers to generate estimable import share functions. The method is based on the work of Chau and Färe, while it is more general in permitting the estimation of Hicksian import share systems, which...

Recent research has documented a U-shaped industrial concentration curve over an economy’s development path. How far can neoclassical trade theory take us in explaining this pattern? We estimate the production side of the Heckscher–Ohlin model using industry data on 44 developed and...

In this paper, we consider a model where producers set their prices based on their prediction of the aggregated price level and an exogenous variable, which can be a demand or a cost-push shock. To form their expectations, they use OLS-type econometric learning with bounded memory. We show that...

In this paper, we examine a free entry aggregative game where agents can be asymmetric. We show the existence of a pure strategy subgame perfect equilibrium of this game. The proof is a constructive one and therefore we provide a method to derive a subgame perfect equilibrium within a reasonable...

In this paper, we study the functional central limit theorem for ARMA–GARCH processes. We prove that, under the finite second moment assumption, the stationary ARMA–GARCH process is geometricallyL2-NED and that the functional central limit theorem holds.

We perform comparative statics for a general model of asymmetric oligopoly and derive a concise formula for the response of one firm to a marginal change in its rival’s strategic variable, taking into account the responses of all other firms. We obtain the conditions under which the sign of...