This experimental study is concerned with the impact of the timing of the resolution of risk on people’s willingness to take risks, with a special focus on the role of affect. While the importance of anticipatory emotions has so far been only inferred from decisions regarding hypothetical...

This paper uses data from the Indonesian manufacturing census in order to uncover the determinants of firm exports over the period 1990-2005. We examine to what extent differences in firm export propensity and intensity are a consequence of firm-level (microeconomic), of place-based...

This Paper reviews the controversy over China’s exchange rate regime. Placing the issue in the context of the literature on exit strategies, it argues that now is the best time for China to exit from its peg. Moving to a managed float would be in the country’s own interest; it would help the...

This paper argues that the recent Southeast Asian currency crises was caused by large prospective deficits associated with implicit bailout guarantees to failing banking systems. We articulate this view using a simple dynamic general equilibrium model whose key feature is that a speculative...

Following the Asian financial crisis in 1997-98, a number of Asian central banks adopted inflation targeting. We explore how successful this framework has been by looking at the persistence of inflation, as measured by the sum of the coefficients in an autoregressive model for inflation, using a...

We develop a model of the gambler's fallacy -- the mistaken belief that random sequences should exhibit systematic reversals. We show that an individual who holds this belief and observes a sequence of signals can exaggerate the magnitude of changes in an underlying state but underestimate their...

The empirical performance of macroeconomic exchange rate models is more than disappointing. This dismal result is also reflected in the forecasting capabilities of professional analysts: all in all, analysts are not in a position to beat naïve random walk forecasts. The root for this deficient...

Our model of the initial public offering process links the three main empirical IPO ‘anomalies’ – underpricing, hot issue markets, and long-run underperformance – and traces them to a common source of inefficiency. We relate hot IPO markets (such as the 1999/2000 market for Internet...

A reduction in inflation can fuel run-ups in housing prices if people suffer from money illusion. For example, investors who decide whether to rent or buy a house by simply comparing monthly rent and mortgage payments do not take into account that inflation lowers future real mortgage costs. We...