Bayesian inference requires an analyst to set priors. Setting the right prior is crucial for precise forecasts. This paper analyzes how optimal prior changes when an economy is hit by a recession. For this task, an autoregressive distributed lag (ADL) model is chosen. The results show that a...

The New Classical theorem asserts that (a) the individuals with rational expectations do not change their consumption levels unless the expected permanent income changes, and, (b), thusly, tax and/or debt policies are not significant on consumption decisions of the individuals, at least in the...

A particularly useful approach for analyzing pooled cross sectional and time series data is Swamy's random coefficient panel data (RCPD) model. This paper examines the performance of Swamy's estimators and tests associated with this model by using Monte Carlo simulation. The Monte Carlo study...

This report presents an application of a macro stress testing procedure on credit risk in the Romanian banking system. Macro stress testing, i.e. assessing the vulnerability of financial systems to exceptional but plausible macroeconomic scenarios, maintains a central role in macro-prudential...

The New Classical theorem asserts that (a) the individuals with rational expectations do not change their consumption levels unless the expected permanent income changes, and, (b), thusly, tax and/or debt policies are not significant on consumption decisions of the individuals, at least in the...

We address the issue of estimation and inference in dependent nonstationary panels of small cross-section dimensions. The main conclusion is that the best results are obtained applying bootstrap inference to single-equation estimators. SUR estimators perform badly, or are even unfeasible, when...

Through an estimated and calibrated DSGE model with imperfect competition and nominal rigidities, this work aims to assess the dynamic effects of exogenous perturbations in a small open economy to provide a prescription of a simple monetary policy rule associated with the minimal welfare losses...