While the impact of exchange rate changes on economic growth has long been an issue of key importance in international macroeconomics, it has received renewed attention in recent years, owing to weaker growth rates and the debate on "currency wars". However, in spite of its prevalence in the...

This paper shows how exact solutions for the transient density of a large class of continuous-time Markov switching models can be obtained. We illustrate the pertinent approach for both simple diffusion models with a small number of regimes as well as for the more complicated so-called Poisson...

Maximum likelihood estimation of discretely observed diffusion processes is mostly hampered by the lack of a closed form solution of the transient density. It has recently been argued that a most generic remedy to this problem is the numerical solution of the pertinent Fokker-Planck (FP) or...

This paper investigates the nature of the IV method for tackling endogeneity. By tracing the rise and fall of the method in macroeconometrics and its subsequent revival in microeconometrics, it pins the method down to an implicit model respecification device - breaking the circular causality of...

DSGE models with generalized shock processes have been a major area of research in recent years. In this paper, I show that the structural parameters governing DSGE models are not identified when the driving process behind the model follows an unrestricted VAR. This finding implies that...

In this study, we employ an innovative new methodology inspired from the approach of Hwang and Salmon (2004) and based on the cross sectional dispersion of trading volume to examine the herding behavior on Toronto stock exchange. Our findings show that the herd phenomenon consists of three...

Long memory (long-term dependence) of volatility counts as one of the ubiquitous stylized facts of financial data. Inspired by the long memory property, multifractal processes have recently been introduced as a new tool for modeling financial time series. In this paper, we propose a parsimonious...

This paper discusses three families of flexible parametric probability density functions: the skewed generalized t, the exponential generalized beta of the second kind, and the inverse hyperbolic sin distributions. These families allow quite flexible modeling the first four moments of a...

This study provides quarterly time-series estimates of the misalignment in the REER of the Renminbi (RMB). The estimation is based on a commonly used economic approach, but with a wider and more up-to-date coverage of data and a more extensive use of econometric modelling techniques. Our...

Chartist and fundamentalist models have proven to be capable of replicating stylized facts on speculative markets. In general, this is achieved by specifying nonlinear interactions of otherwise linear asset price expectations of the respective trader groups. This paper investigates whether or...