Understanding the process of economic growth involves comparing competing theoretical models and evaluating their empirical relevance. Our approach is to take the neoclassical stochastic growth model directly to the data and make inferences about the model parameters of interest. In this paper,...

This paper shows that the consumption-based capital asset pricing model (C-CAPM) with low-probability disaster risk rationalizes pricing errors. We find that implausible estimates of risk aversion and time preference are not puzzling if market participants expect a future catastrophic change in...

We provide a framework for inference in dynamic equilibrium models including financial market data at daily frequency, along with macro series at standard lower frequency. Our formulation of the macro-finance model in continuous-time conveniently accounts for the difference in observation...

It is common practice to estimate the volatility-growth link by specifying a standard growth equation such that the variance of the error term appears as an explanatory variable in this growth equation. The variance in turn is modelled by a second equation. Hardly any of existing applications of...

It is common practice to estimate the volatility-growth link by specifying a standard growth equation such that the variance of the error term appears as an explanatory variable in this growth equation. The variance in turn is modelled by a second equation. Hardly any of existing applications of...

In this paper, we study the statistical properties of heterogeneous agent models with incomplete markets. Using a Bewley-Hugget-Aiyagari model we compute the equilibrium density function of wealth and show how it can be used for likelihood inference. We investigate the identifiability of the...