This paper investigates implications of nominal rigidities for the risk premium. We use Obstfeld and Rogoff (1998) type DSGE model equipped with nominal rigidities, imperfect market competitions, a production sector, and a money-in-the-utility function. For a monthly frequency, we generate...

The success of the Chinese economic reforms has been linked by many observers to the implementation of a dual track liberalization mechanism. This approach, relying upon the continued enforcement of existing contracts and the simultaneous creation of a free market sector, represents a powerful...

A government policy regarding the reduction of state shares in state-owned enterprises (SOE) triggered a crash in the Chinese stock market. The sus- tained depression even after policy adjustments constitutes a puzzle— the so called “state-share paradox.”The empirical evidence shows...

A government policy regarding the reduction of state shares in state-owned enterprises (SOE) triggered a crash in the Chinese stock market. The sus- tained depression even after policy adjustments constitutes a puzzle— the so called “state-share paradox.”The empirical evidence shows...

If firm sizes have a small dispersion, microeconomic shocks lead to negligible aggregate fluctuations. This has led economists to appeal to macroeconomic (sectoral or aggregate shocks) shocks to explain aggregate fluctuations. However, the empirical distribution of firms is fat-tailed. This...

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...

This paper proposes a new empirical representation of US inflation expectations in a Stace-Space Markov-Switching framework in order to identify the expectations regimes which are associated with short and long term Phillips curves. Results suggest that the dynamics of in‡ation expectation...

Standard theory of small open economies predicts a smooth path for consumption and investment over time, and procyclical current account balances and employment. This contrasts with the data for emerging countries, where consumption, investment and employment are highly procyclical and volatile,...

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...

I examine the statistical model of permanent and transitory shocks to output under the following structural assumptions: An aggregate supply shock that raises output will cause the price level to fall and an aggregate demand shock that initially raises output will cause the price level to rise....