We propose a simple and powerful numerical algorithm to compute the transition process in continuous-time dynamic equilibrium models with rare events. In this paper we transform the dynamic system of stochastic differential equations into a system of functional differential equations of the...

In den vergangenen Jahren haben Unternehmen durch betriebswirtschaftlicheOptimierungsprozesse vor allem in denproduzierenden Bereichen große Einsparpotenziale erschlossen.Deutsche Unternehmen sind international konkurrenzfähig- die Stabilität des wirtschaftlichen Wachstums in...

This paper shows that non-linearities from a neoclassical production function alone can generate time-varying, asymmetric risk premia and predictability over the business cycle. These empirical key features become relevant when we allow for non-normalities in the form of rare disasters. We...

This paper presents strong empirical evidence that the observed heterogeneity of output volatility across countries and over time is partly endogenous. In particular, based on a closed-form solution we obtain a (long-run) equilibrium relationship between taxes and output volatility in the...