A host of recent studies show that attention allocation has important economic consequences. This paper reports the first empirical test of a cost-benefit model of the endogenous allocation of attention. The model assumes that economic agents have finite mental processing speeds and cannot...

Economics

In this study, the author demonstrates that the selection of an appropriate money-demand function is crucial to ascertain the relationship between fiscal deficits and inflation. To do so, the author incorporates a Selden-Latané money-demand function into a micro-founded extension of the model...

We propose a fully nonparametric estimation theory for the drift vector and the diffusion matrix of multivariate diffusion processes. The estimators are sample analogues to infinitesimal conditional expectations constructed as Nadaraya-Watson kernel averages. Minimal assumptions are imposed on...

We propose a theoretical approach to bandwidth choice for continuous-time Markov processes. We do so in the context of stationary and nonstationary processes of the recurrent kind. The procedure consists of two steps. In the first step, by invoking local Gaussianity, we suggest an automated...

This paper studies the functional estimation of the drift and diffusion functions for recurrent scalar diffusion processes from equally spaced observations using the local polynomial kernel approach. Almost sure convergence and a CLT for the estimators are established as the sampling frequency...

Economics

Economics

International Macroeconomics has long sought an explanation for current account fluctuations that matches the data. The approaches have typically focused on better models and new macroeconomic variables. We demonstrate the limitations of this approach by showing that idiosyncratic shocks are an...

Defaults often have a large influence on consumer decisions. We identify anoverlooked but practical alternative to defaults: requiring individuals to make explicitchoices for themselves. We study such ?active decisions? in the context of401(k) saving. We find that compelling new hires to make...