The authors test the statistical significance of Pindyck’s (1999) suggested class of econometric equations that model the behaviour of long-run real energy prices. The models postulate meanreverting prices with continuous and random changes in their level and trend, and are estimated using...

In the United States, the Federal Reserve has a dual mandate of promoting stable inflation and maximum employment. Since the Fed directly controls only one instrument-the federal funds rate-the authors argue that the Fed's priorities continuously alternate between inflation and economic...

The author proposes a class of exact tests of the null hypothesis of exchangeable forecast errors and, hence, of the hypothesis of no difference in the unconditional accuracy of two competing forecasts. The class includes analogues of the well-known Diebold and Mariano (1995) parametric and...

Asymmetric shocks are common in markets; securities' payoffs are not normally distributed and exhibit skewness. This paper studies the portfolio holdings of heterogeneous agents with preferences over mean, variance and skewness, and derives equilibrium prices. A three funds separation theorem...

The early work of Tobin (1958) showed that portfolio allocation decisions can be reduced to a two stage process: first decide the relative allocation of assets across the risky assets, and second decide how to divide total wealth between the risky assets and the safe asset. This so called...

This paper studies the impact of international capital flows on asset prices through risk premia. We investigate whether foreign purchases of U.S. Treasury securities significantly contributed to the decline in excess returns on long-term bonds between 1995 and 2008. We run forecasting...

This paper addresses an existing gap in the developing literature on conditional skewness. We develop a simple procedure to evaluate parametric conditional skewness models. This procedure is based on regressing the realized skewness measures on model-implied conditional skewness values. We find...

Phillips curves are generally estimated under the assumption of linearity and parameter constancy. Linear models of inflation, however, have recently been criticized for their poor forecasting performance. The author investigates the linearity and constancy assumptions of a standard reduced-form...

A number of authors have suggested that economies face a long-run inflation-unemployment trade-off due to downward nominal-wage rigidity. This theory has implications for the nature of the short-run Phillips curve when wage inflation is low. Akerlof, Dickens and Perry have developed an empirical...

Real wage rigidities have recently been proposed as a way of building intrinsic persistence in inflation within the context of New Keynesian Phillips Curves. Using two recent illustrative structural models, we evaluate empirically the importance of real wage rigidities in the data and the extent...