This paper develops a framework to analyze the relationship between the diffusion of new technologies and the decentralization decisions of firms. Centralized control relies on the information of the principal, which we equate with publicly available information. Decentralized control, on the...

This paper introduces a labor force participation choice into a labor marketmatching model embedded in a dynamic stochastic general equilibrium set-upwith production and savings. The participation choice is modelled as a tradeoffbetween forgoing the expected benefits of being search active and...

Many developing countries have suffered under the personal rule of “kleptocrats”, who implement highly inefficient economic policies, expropriate the wealth of their citizens, and use the proceeds for their own glorification or consumption. We argue that the success of kleptocrats rests, in...

Why would two risk-average agents write a nominal contract? A possible answer is that for an agent who is subject to risks caused by price variability, a nominal contract that offers hedging against these risks may be optimal. This paper argues that nominal contracts may have a role in...

A General Equilibrium model of investment is constructed in which the pay-offs of firms depend on each other''s actions. It is shown that when these actions are unobservable but aggregate output is in the information set of the agents; it acts as a signal. The implication is that output will...

A competitive business cycle model is developed in which internal increasing returns translate a white noise random shock into temporarily agglomerated economic activity. Te qualitative nature of the economy varies over the cycle due to changes in the underlying economic structure, giving rise...

Unspanned stochastic volatility (USV) refers to the inability of bonds to replicate volatility-sensitive derivative securities. Affine term structure models require special restrictions on the parameters to exhibit USV. We use a joint Eurodollar futures and options data set to estimate affine...

This paper evaluates the role of various volatility specifications, such as multiple stochastic volatility (SV) factors and jump components, in appropriate modeling of equity return distributions. We use estimation technology that facilitates nonnested model comparisons and use a long data set...

This paper proposes an econometric procedure that allows the estimation of the pricing kernel without either any assumptions about the investors preferences or the use of the consumption data. We propose a model of equity price dynamics that allows for (i) simultaneous consideration of multiple...

The purpose of this paper is to bridge two strands of the literature, one pertaining to the objective or physical measure used to model an underlying asset and the other pertaining to the risk-neutral measure used to price derivatives. We propose a generic procedure using simultaneously the...