We investigate the economic significance of trading off empirical validity of models against other desirable model properties, and the potential loss from ’overestimating’ model uncertainty and basing monetary policy on a relatively robust model, or on a suite of models. We find that...

We investigate the economic significance of trading off empirical validity of models against other desirable model properties. Our investigation is based on three alternative econometric systems of the supply side, in a model that can be used to discuss optimal monetary policy in Norway. Our...

This paper provides real-time evidence on the frequency, size, duration and economic significance of arbitrage opportunities in the foreign exchange market. We investigate deviations from the covered interest rate parity (CIP) condition using a unique data set for three major capital and foreign...

We employ a new decision-theoretic approach to dealing with Knightian uncertainty based on Simon's bounded rationality. The basic tool of this approach is a quantitative answer to the question: For a specified policy, among a set of policies, how much can our assumptions regarding e.g. model and...

We investigate whether a decline in real interest rates and the US dollar contribute to higher commodity prices, and whether commodity prices tend to display overshooting behavior in response to changes in especially real interest rates. We analyze the behavior of a broad range of real commodity...

This paper investigates the validity of the law of one price (LOP) in international financial markets by examining the frequency, size and duration of inter-market price di erentials for borrowing and lending services (`one-way arbitrage'). Using a unique data set for three major capital and...