An extensive literature has analyzed the implications of hidden shifts in the dividend growth rate. However, corresponding research on learning about growth persistence is completely lacking. Hidden persistence is a novel way to introduce long-run risk into standard business-cycle models of...

This paper investigates the properties of distortions that manifest themselves as wedges in the equilibrium conditions of the neoclassical growth model across a sample of 22 OECD countries for the 1970–2011 period. The quantitative relevance of each wedge and its robustness in generating...

The aim of this work is to explore the possible types of phenomena that simple macroeconomic Agent-Based models (ABMs) can reproduce. We propose a methodology, inspired by statistical physics, that characterizes a model through its “phase diagram” in the space of parameters. Our first...

We explore a New Keynesian Model with diverse beliefs and study the aggregation problems in the log-linearized economy. We show the solution of these problems depend upon the belief structure. Agents' beliefs are described by individual state variables and satisfy three Rationality Axioms,...

Optimal control of dynamic econometric models has a wide variety of applications including economic policy relevant issues. There are several algorithms extending the basic case of a linear-quadratic optimization and taking nonlinearity and stochastics into account, but being still limited in a...

No, they are not; at least not in the UK. By examining GDP dynamics we find that, over a time-span of two decades, an easy-to-perform adaptive expectations model systematically outperforms other standard predictors in terms of squared forecasting errors. This should reduce model uncertainty and...

This paper characterizes long-run and short-run optimal fiscal policy in the labor selection framework. In a calibrated non-Ramsey decentralized equilibrium, labor market volatility is inefficient. Keeping fixed the structural parameters, the Ramsey government achieves efficient labor market...

This paper studies the equilibrium determinacy properties of a simple interest rate rule in a small open economy subject to currency substitution (i.e., the use of a foreign currency for domestic transactions) and risk premia on foreign borrowing. It shows that if currencies are substitute in...

As recent experience suggests, the most significant economic fluctuations are those that combine real and financial factors. This paper works out a simple model that couples a version of Goodwin׳s (1967) growth cycle model of real fluctuations with insights drawn from a model of financial...

The efficacy of central bank communications is inextricably linked to the characteristics of the monetary policy framework. Therefore, this paper presents a set of fundamental principles regarding the joint design of monetary policy strategy and communications. The practical implications of...