We present an estimated dynamic stochastic general equilibrium model of stock market bubbles and business cycles using Bayesian methods. Bubbles emerge through a positive feedback loop mechanism supported by self-fulfilling beliefs. We identify a sentiment shock that drives the movements of...

This paper presents a novel Bayesian method for estimating dynamic stochastic general equilibrium (DSGE) models subject to a constrained posterior distribution for the implied Sharpe ratio. We apply our methodology to a DSGE model with habit formation in consumption and leisure, and show that...

We construct, and then estimate by maximum likelihood, a tractable dynamic stochastic general equilibrium model with incomplete insurance and heterogenous agents. The key feature of our framework is that cross-sectional heterogeneity remains finite dimensional. The solution to the model thus...

We study the relationship between monetary policy and long-term rates in a structural, general equilibrium model estimated on both macro- and yield-data from the United States. Regime shifts in the conditional variance of productivity shocks, or "uncertainty shocks," are a crucial driver of bond...

We estimate a model in which fiscal and monetary policy obey the targeting rules of distinct policy authorities, with potentially different objective functions. We find: (1) Time-consistent policy fits U.S. time series at least as well as instrument-rules-based behavior; (2) American policies...

Structural DSGE models are used for analyzing both policy and the sources of business cycles. Conclusions based on full structural models are, however, potentially affected by misspecification. A competing method is to use partially identified SVARs based on narrative shocks. This paper asks...

We model network formation and interactions under a unified framework by considering that individuals anticipate the effect of network structure on the utility of network interactions when choosing links. There are two advantages of this modeling approach: first, we can evaluate whether network...

Recent papers have argued that one implication of globalization is that domestic inflation rates may have now become more a function of ``global", rather than domestic, economic conditions, as postulated by closed-economy Phillips curves. This paper aims to assess the empirical importance of...

This paper aims to infer the evolving Fed's inflation target by estimating a monetary model under the assumptions of RE and learning. The results emphasize how different assumptions about expectations may have important effects on the inferred target movements.

How strong is the interdependence between the macroeconomy and the stock market? This paper estimates a New Keynesian general equilibrium model, which includes a wealth effect from asset price fluctuations to consumption, to assess the quantitative importance of interactions among the stock...