Expectations play a central role in modern macroeconomics. The econometric learning approach, in line with the cognitive consistency principle, models agents as forming expectations by estimating and updating subjective forecasting models in real time. This approach provides a stability test for...

In this paper, we analyze the importance of the frequency of decision making for macroeconomic dynamics. We explain how the frequency of decision making (period length) and the unit of time measurement (calibration frequency) differ and study the implications of this difference for macroeconomic...

Forward-looking RE models such as the popular New Keynesian (NK) model do not provide a unique prediction about how the model economy behaves. We need some mechanism that ensures determinacy. McCallum (2011) says it is not needed because models are learnable only with the determinate solution...

We study the competitive equilibrium of a market for votes where voters can trade votes for a numeraire before making a decision via majority rule. The choice is binary and the number of supporters of either alternative is known. We identify a sufficient condition guaranteeing the existence of...

The paper proposes a model of on-the-job search and industry dynamics in which search is directed. Firms permanently differ in productivity levels, their production function features constant returns to scale, and search costs are convex in search intensity. Wages are determined in a competitive...

In this paper we synthesize exogenous and endogenous sources of economic growth in a stochastic dynamic general equilibrium model. Endogenous growth can be engendered by internal constant returns to scale or by external increasing returns to scale in the production of human capital or in the...

It is known that, in the context of a real business cycle model with constant returns to scale and a balanced budget fiscal policy rule, steady state indeterminacy may arise as a result of endogenous labor income tax rates. In this paper, it is shown that when the government finances its...

This paper considers a general class of nonlinear rational-expectations models in which policymakers seek to maximize an objective function that may be household expected utility. We show how to derive a target criterion that is: (i) consistent with the model's structural equations, (ii) strong...

The theory of monotone comparative statics and supermodular games is presented as the appropriate tool to model complementarities. The approach, which has not yet been fully incorporated into the standard toolbox of researchers, makes the analysis intuitive and simple, helps in deriving new...

In this paper we consider a Ramsey one-sector model with non-separable homothetic preferences, endogenous labour and productive external effects arising from average capital and labour. We show that indeterminacy cannot arise when there are only capital externalities but that it does when there...