A two-parameter family of filters is proposed in which the HP filter is considered as the lowest order member. While the HP filter converges to linear time trend as the smoothing factor grows, the higher order members of the proposed family converge to higher order polynomial time trends. The...

One of the most challenging elements of the inflation-targeting framework is the exchange rate forecast. Wadhwani (1999) proposed a UIP, where real variables like the unemployment differential, the current account differential, and the excess return of financial assets affect the expected...

In this paper we take seriously the consequences of the Pricing Equation in constructing a novel consistent estimator of the stochastic discount factor (SDF) using panel data. Under general conditions it depends exclusively on appropriate averages of asset returns, and its computation is a...

A parental seller with market power to some degree in its product market can earn rents. In this context, there is a gain to granting credit for the purchase of the product and thus the establishment of captive finance company for expanding the sales by offering loans to consumers who need...

A holdup model is analyzed in which one party, the seller, has an investment project that the other party, the buyer, can subsidize. The investment project remains the seller's; she cannot transfer her entire control rights to it. In particular, she can always refuse to allow the buyer to...

This paper develops a limiting theory for Wald tests of weak exogeneity in error correction models (ECMs). It is well known that Wald statistics on cointegrated systems may involve nonstandard distribution and nuisance parameters, if $I(1)$ variables are not negligible in the statistics. To...

Abstract It is increasingly recognized that institutional factors such as trade unions do play a dominant role in determining the levels of wages, standard of working conditions. This is more pronounced in the industrial sector of developing economies. The role of labor organizations in the...

I develop a Markov model of samrt money chasing past winning funds while taking into account associated costs. The model also allows market capital entry and exit. The steady-state capital allocations re derived using constant transition probabilities. The results sugget that down side risk is...

This paper considers maximum likelihood (ML) based inferences for dynamic panel data models. We focus on the analysis of the panel data with a large number of cross-sectional units and a small number of repeated time-series observations for each cross-sectional unit. We examine several different...

When univariate methods are applied to real exchange rates, point estimates of autoregressive coefficients typically imply very slow rates of mean reversion. Rogoff (1996) discusses that the remarkable consensus of 3-5 year half-lives of purchasing power parity (PPP) deviations is found among...