A dominant explanation of price rigidity is the so-called "menu cost model" according to which small costs of changing prices may imply that firms keep nominal prices unchanged to nominal shocks which therefore have real effects. Crucial to this explanation is the assumption that price...

We give an overview of a broad class of models designed to capture stochastic volatility in financial markets, with illustrations of the scope of application of these models to practical finance problems. In a broad sense, this model class includes GARCH, but we focus on a narrower set of...

We propose two new jump-robust estimators of integrated variance based on highfrequency return observations. These MinRV and MedRV estimators provide an attractive alternative to the prevailing bipower and multipower variation measures. Specifically, the MedRV estimator has better theoretical...

This paper reviews basic notions of return variation in the context of a continuous-time arbitrage-free asset pricing model and discusses some of their applications. We first define return variation in the infeasible continuous-sampling case. Then we introduce realized measures obtained from...

The role of demand management policy is considered in a two-sector open economy model with price-taking firms and imperfect competition in the labor market. Demand management policies are shown to affect the equilibrium distribution of prices and hence output in the case of both supply...

Restraints on the public budget limit the ability of the public sector to use financial markets for intertemporal substitution. This interferes with the role of the public budget as a buffer which provides insurance and possibly stabilizes income and thereby private consumption. We consider this...

Volatility has been one of the most active areas of research in empirical finance and time series econometrics during the past decade. This chapter provides a unified continuous-time, frictionless, no-arbitrage framework for systematically categorizing the various volatility concepts,...

Restraints on the public budget may limit the ability of the public sector to use financial markets for the diversification of shocks. This interferes with the role of the public budget as a buffer which may provide insurance by stabilizing income and thereby private consumption. We consider...

This paper discusses how international integration affects the need and scope for welfare state activities. The first part reviews the main mechanisms, which have been considered in the literature, namely, tax base mobility, risk and race to the bottom effects in welfare policies. The second...

Nominal rigidities imply that monetary neutrality is broken, but can they also account for persistent effects of nominal shocks? One possible propagation mechanism may arise from the fact that nominal price and wage decisions are not coordinated in a decentralized economy, but made by numerous...