The Euler equation model for investment with adjustment costs and variable capital utilization is estimated using aggregate US post-war data with econometric methods that are robust to weak instruments and exploit information in possible structural changes. Various alternative identification...

Time-consistency is a key feature of many important policy problems, such as those relating to optimal fiscal policy and optimal monetary policy. It is also important for private-sector decision-making through mechanisms such as quasi-geometric discounting. These problems are generally solved...

In this paper we consider conditions under which the estimation of a log-linearized Euler equation for consumption yields consistent estimates of the preference parameters. When utility is isoelastic and a sample covering a long time period is available, consistent estimates are obtained from...

Most of the empirical literature on consumption behaviour over the last decades has focused on estimating Euler equations. However, there is now consensus that data-related problems make this approach unfruitful, especially for answering policy relevant issues. Alternatively, many papers have...

A large psychology literature argues that decision-makers' forecasts of their future circumstances appear overly influenced by their perception of the new information embedded in their current circumstances. We adopt the diagnostic expectations (DE) paradigm (Bordalo et al., 2018) to capture...

We investigate the empirical evidence on the Euler equation models using methods that are robust to weak instruments and structural changes for a set of eight countries. We start with the conventional closed economy model and consider extensions that include habits and hand-to-mouth consumers....

We investigate the empirical implications of the investment-based model of asset pricing for the Hansen-Jagannathan and Kozak-Nagel-Santosh discount factors in the linear span of equity returns. Our methodology is based on the equivalence between investment and equity returns implied by the...