There is a recent strand of literature which suggests that second order approximations of linear quadratic objective functions in the steady state vicinity, namely when assuming stochastic scenarios, lead to very interesting and useful results. For example, applications in monetary policy resort...

We may distinguish between two concepts of technology: a theoretical level of technology (that is, a technology possibilities frontier) and a level of technology in practice (that is, ready to use in production technology). Having these two concepts in mind, the paper develops an intertemporal...

Asset prices are forward looking. This evidence implies that prices of financial assets are essentially determined by the traders expectations about future prices. Another evidence about asset prices is that these do not seem to follow a predictable pattern over time; we observe periods of high...

Purpose – Recent literature has been able to include into standard optimal growth models some hypotheses that allow for the generation of endogenous long-run fluctuations. This paper aims to contribute to this endogenous business cycles literature by considering social interactions....

This note characterizes the adjustment of the inflation rate towards a new steady-state, in response to a monetary policy shock. The sluggish nature of the adjustment is the straightforward outcome of the type of information dissemination one considers. Namely, firms will be grouped in clusters,...

Consider a network connecting individual agents that are endowed with distinct sentiments or ‘views of the world’. Specifically, assume that each node in the network contains an agent that, at a given period t, can be found in one of five states: sentiment neutrality, exuberant optimism,...