This paper studies dynamics of endogenous business cycles and exchange rate volatility in a small open economy. Without market imperfections, domestic price and wage adjustments respond sluggishly to disequilibrium situations on real domestic markets while prices on international capital markets...

Common folklore in growth theory suggests that the stability of balanced growth paths in the capital-labor space is essentially guaranteed by conditions which imply stability of the corresponding steady states of the models in intensity form. We show by means of simple examples that, in general,...

This paper derives a general explicit sequential asset price process for an economy with overlapping generations of consumers. They maximize expected utility with respect to subjective transition probabilities given by Markov kernels. The process is determined primarily by the interaction of...