In this paper, I study the welfare properties of growth models with endogenous innovation, knowledge externalities, and monopoly pricing of new goods. Since useful policy prescriptions cannot be inferred from a balanced growth analysis, welfare is analyzed for transition paths. I provide a...

Empirical evidences tell us that in the recent years the expansion period is increased with reduction of the contraction period in the U.S. business cycles. Moreover, the business cycles in the United States also show the trend to be moderated with recent economic growth induced and supported by...

Decision theorists claim that an ordinal measure of risk may be sufficient for an agent to make a rational choice under uncertainty. We propose a measure of financial risk, namely the Varying Cross-sectional Risk (VCR), that is based on a ranking of returns. VCR is defined as the probability of...

This paper considers the parametric inference of a wide range of structural econometric models. The class of models considered includes those with parameter-dependent support and those derived from game-theoretic models. Inference of those models has raised some important econometric issues....

Using more than two years of daily interest rate cap price data, this paper provides a systematic documentation of a volatility smile in cap prices. We find that Black (1976) implied volatilities exhibit an asymmetric smile (sometimes called a sneer) with a stronger skew for in-the-money caps...

This paper considers tests of misspecification in a heteroscedastic transformation model. We derive Lagrange multiplier (LM) statistics for (i) testing functional form and heteroscedasticity jointly, (ii) testing functional form in the presence of heteroscedasticity, and (iii) testing...

Bootstrap aggregating or Bagging, introduced by Breiman (1996a), has been proved to be effective to improve on unstable forecast. Theoretical and empirical works using classification, regression trees, variable selection in linear and non-linear regression have shown that bagging can generate...

The paper examines the processes underlying economic fluctuations by investigating the volatility moderation of U.S. economy in the early 1980's. We decompose the volatility decline using a dynamic factor framework into a common stochastic trend, common transitory component and idiosyncratic...

We revisit the concept of unpredictability to explore its implications for forecasting strategies in a non-stationary world subject to structural breaks, where model and mechanism differ. Six aspects of the role of unpredictability are distinguished, compounding the four additional mistakes most...

In this paper we consider different periodic extensions of regression models with autoregressive fractionally integrated moving average disturbances for the analysis of daily spot prices of electricity. We show that day-of-the-week periodicity and long memory are important determinants for the...