This paper discusses the best way to formulate and estimate a dynamic econometric model when interest focuses mainly upon its long-run properties. Using results derived for the more general context of transformed regression models, it is shown how point estimates and the standard errors of...

This Paper is an exploration into the links between macroeconomics and finance as they affect the FOREX risk premium. SDF theory is used in which the factors are observable macroeconomic variables. Three SDF theories are compared: a benchmark model based on traditional tests of FOREX efficiency;...

This paper examines the appreciation of the dollar over the period 1980-85. The standard theories try to explain the increased demand for dollar assets by differential rates of return on bonds or by "safe-haven" arguments associated with the lower riskiness of United States assets. Neither of...

Recent concern about the difficulty of obtaining structurally stable models of money demand combined with the removal of capital controls have drawn attention to the theory of currency substitution (CS). The purpose of this paper is to examine whether CS is a relevant factor in the demand for...

A measure of the credibility of monetary policy is the inflation risk premium embodied in nominal yields. This will be time varying and can be estimated by combining the information contained in the nominal term structure of interest rates with that in the real term structure of...

If a nation fails to satisfy its intertemporal budget constraint (IBC) then, like a government or a household, either it will become insolvent or it can consume more of its income. The main purpose of this paper is to establish necessary and sufficient conditions for a nation to satisfy its IBC,...

We review the methods used in many papers to evaluate DSGE models by comparing their simulated moments with data moments. We compare these with the method of Indirect Inference to which they are closely related. We illustrate the comparison with contrasting assessments of a two-country model in...

With this Handbook, Miroslav Jovanović has provided readers with both an excellent stand-alone original reference book as well as an integral part of a comprehensive three-volume set. This introduction into a rich and expanding academic and practical world of international economic...

We review the methods used in many papers to evaluate DSGE models by comparing their simulated moments with data moments. We compare these with the method of Indirect Inference to which they are closely related. We illustrate the comparison with contrasting assessments of a two-country model in...

This paper establishes the ability of a Real Business Cycle model to account for UK real exchange rate behaviour. The model is tested by the method of indirect inference, bootstrapping the errors to generate 95% confidence limits for a time-series representation of the real exchange rate, as...