We examine several continuous-time term structure models in which the short rate is subject both to continuous changes and to discrete shifts. Several regime-switching term structure models are developed, with regime-dependence in various combinations of their drift and diffusion parameters. We...

We develop and estimate a consumption-based asset pricing model that assumes recursive utility using historical US financial data, allowing for regime changes, priced regime risk, and intrinsic bubbles. We also estimate several restricted versions which include only a subset of these features....

In a linear rational expectations two-country model, using an aggregate demand, aggregate supply framework, we analyse the effects of the adoption of an inflation-targeting regime on exchange rate volatility and the possible scope for policy coordination. This analysis is conducted using...