This paper presents a complete analysis of a stochastic version of the Solow growth model in which all parameters are ergodic random variables. Applying random dynamical systems theory, we prove that the dynamics and, in particular, the long-run behavior is uniquely determined by a globally...

In this paper, we study the effect of financial markets on the investment of a two-good two-country economy with stochastic production in a dynamic framework. Each country produces and invests only one good and, therefore, makes decisions as a central planner in an optimal growth model. Trade...

This paper analyzes the dependence of average consumption on the saving rate in a one-sector neoclassical Solow growth model with pro-duction shocks and stochastic rates of population growth and depreciation where arbitrary ergodic processes are considered. We show that the long-run behavior of...

Understanding differences in business cycle phenomena between Emerging Market Economies (EMEs) and industrialized countries has been at the center of recent research on macroeconomic fluctuations. The purpose of this paper is to investigate the importance of certain credit market imperfections...

We provide a framework for analyzing bilateral mergers when there is two-sided asymmetric information about firms’ types. We show that there is always a "no-merger" equilibrium where firms do not consent to a merger, irrespective of their type. There may also be a "cut-off" equilibrium if the...

We analyze a Bayesian merger game under two-sided asymmetric information about firm types. We show that the standard prediction of the lemons market model–if any, only low-type firms are traded–is likely to be misleading: Merger returns, i.e. the difference between pre- and post-merger...

This paper surveys recent advances in the application of random dy- namical systems theory in economics. It illustrates the usefulness of this framework for modeling and analysis of economic phenomena with stochastic components, mainly focusing on stochastic dynamic models in economic growth....

Sectoral data features (i) changing relative expenditures of different sectors, (ii) non-constancy in relative prices and (iii) long-run trends in relative TFP growth rates across sectors. We provide a tractable theory of industry directed technical change, which is able to reconcile these...

Growth of per-capita income is associated with (i) significant shifts in the sectoral economic structure, (ii) systematic changes in relative prices and (iii) the Kaldor facts. Moreover, (iv) cross-sectional data shows systematic expenditure structure difference between rich and poor households....

We construct and estimate a unifi…ed model combining three of the main sources of cross-country income disparities: differences in factor endowments, barriers to technology adoption and the inappropriateness of frontier technologies to local conditions. The key components are different types of...