We construct a cross-section of stock prices and their corresponding present values of future cash flows. A regression of present value on the initial stock price should have a slope coefficient equal to 1.0. For short horizons, this is a cross-section version of checking the random walk model...

Standard models of intertemporal utility maximization assume that agents discount future utility flows at a constant rate — exponential discounting. Euler equations estimated over different time horizons should have equal discount rates. They do not. Rising term yield premia imply discount...

We estimate a monetary policy rule for the US allowing for possible frequency dependence - i.e., allowing the central bank to respond differently to more persistent innovations than to more transitory innovations, in both the unemployment rate and the inflation rate. Our estimation method uses...

It is widely-known that different methods of detrending data yield different business cycle features. The choice of the detrending method, however, is usually arbitrarily made. This paper aims at revealing potential pitfalls of different detrending methods for the estimation of a standard...

This paper uses information contained in the cross-country yield curves to test the asset-pricing approach to exchange rate determination, which models the nominal exchange rate as the discounted present value of its expected future fundamentals. Since the term structure of interest rates...

The nominal exchange rate is both a macroeconomic variable equilibrating international markets and a financial asset that embodies expectations and prices risks associated with cross border currency holdings. Recognizing this, we adopt a joint macro-finance strategy to model the exchange rate....