This paper studies a target-based procedure to rank lotteries that is normatively and observationally equivalent to the expected utility model. In view of this equivalence, the traditional utility-based language for decision making may be substituted with an alternative target-based language....

This paper describes a parametric family of utility functions for decision analysis. The parameterization is obtained by embedding the HARA class in a four-parameter representation for the risk aversion function. The resulting utility functions have only four shapes: concave, convex, S-shaped,...

This paper challenges the time-inconsistency case for central bank independence. It argues that the time-inconsistency literature not only seriously confuses the substance of the rules versus discretion debate, but also posits an implausible view of monetary policy. Most worrisome, the...

This study presents a framework for extracting long-run GDP growth and inflation expectations from financial market data on a real-time basis. The framework uses information from both stock and bond markets. It builds on a dividend discount model of stock valuation and on a linearized...

This paper examines the long-run effects of supply shocks (such as oil shocks) on inflation in the United States. The persistence of supply shocks in U.S. inflation fell considerably during the period of Volcker’s disinflation (1979-1982). My empirical results suggest that the difference...

This paper offers an explanation for why policy makers stick to inefficient policy decisions. I argue that repealing a policy is a bad signal to voters about the policy maker's competence if voters do not have complete knowledge about the effects of implemented policies. I derive the optimal...

We show that, in repeated common interest games without discounting, strong `perturbation implies efficiency' results require that the perturbations must include strategies which are `draconian' in the sense that they are prepared to punish to the maximum extent possible. Moreover, there is a...