The causal link between monetary variables and output is one of the most studied issues in macroeconomics. One puzzle from this literature is that the results of causality tests appear to be sensitive with respect to the sample period that one considers. As a way of overcoming this difficulty,...

This paper explores the interactions between cross-sectional aggregation and persistence of volatility shocks. We derive the ARMA-GARCH representation that linear aggregates of ARMA processes with GARCH errors admit, and establish conditions under which persistence in volatility of the aggregate...

This paper investigates the presence of target-zone nonlinearities in the Pound Sterling/Deutsche Mark exchange rate for the period of the UK European Exchange Rate Mechanism (ERM) membership, using data with frequency of every two days. Tests against general nonlinear specifications as well as...

We examine several continuous-time term-structure models, in which the short rate is subject to discrete shifts. Our empirical analysis suggests that inquiring which parameters of the short-term interest rate equation are allowed to switch is crucial, as failing to do so may result in switching...

We study how entry and exit decisions of a monopolist are affected by business cycle conditions. We model the business cycle as a two-state Markov process, and assume that the demand curve faced by the monopolist evolves differently in the two states of the economy. We explore conditions under...

Exponential smoothing can introduce spurious auto-correlation in detrended data. The extent of this depends on the length of lag, the value of the smoothing parameter and the nature of the input process. The most widely-used version of exponential smoothing is the Hodrick-Prescott low-frequency...