We explore how the introduction of habit preferences into the simple intertemporal consumption-based capital asset pricing model "solves" the equity premium and risk-free rate puzzles. Our exploration employs spectral utility functions that decompose agents' preferences for consumption...

There has been growing debate about whether bilateral trade agreements are damaging multilateral efforts to eliminate barriers to international trade. This paper develops a model in which trading blocks always charge optimal tariffs and make trade agreements based on strategic considerations.

Despite these disagreements about the nature of the role of government, particularly in Taiwan and Korea, the pattern of economic growth and structural change observed in developing Asia has been broadly consistent with classical and neoclassical models of economic growth and development which...

This paper considers the extent to which fluctuations in Australian economic growth are affected by domestic and overseas economic performance. We investigate the performance of a range of non-linear models versus linear models using Bayes factors and posterior odds ratios. The posterior odds...

A two regime threshold autogressive model is fitted to a trade weighted index of the Australian real exchange rate in order to identify episodes of exchange rate crisis. We find strong evidence of a threshold in the growth rate of the real exchange reate, with the data being classified into two...