The inability of a wide array of dynamic stochastic general equilibrium (DSGE) models to generate fluctuations that resemble actual business cycles has lead to the use of habit formation in consumption. For example, habit formation has been shown to help explain the negative response of labour...

Most Latin American countries experienced their last peak in output per capita relative to the United States’ between 1971 and 1982. Prior to this peak per capita output was rapidly catching up to the developed world. Twenty years after the peak the average country’s relative per...

In this paper, we formalize the idea of human capital as the ability to follow and enforce the rules necessary for orderly conduct of economic transactions. People in the US and other developed countries stand in lines while waiting for the bus, etc., while in many developing countries lines...

In this paper we provide an explicit characterization of the escape dynamics for the Phellps problem of government controlling inflation with adaptive learning of the approximate Phillips curve, alternative to the one considered by Cho, Williams and Sargent (2002) (CWS in sequel). Our approach...

In this paper, we set out the JEM (Japanese Economic Model), a large macroeconomic model of the Japanese Economy. Although the JEM is a theoretical model designed with a view to overcoming the Lucas (1976) critique of traditional large macroeconomic models, it can also be used for both...

How large are welfare costs related to economic aggregate fluctuations is a topic of great concern among economists at least since Robert Lucas’ well-known and thoughtprovoking exercise in the late 1980s. Our analysis assesses the magnitude of such costs for 11 countries in South America...

This paper assesses the effects of agency costs and asymmetric information in credit markets. Asymmetric information and agency costs occur whenever lenders delegate control over resources to borrowers, leading to adverse selection, moral hazard and monitoring costs because of the inability to...

USAGE is a 500 industry dynamic computable general equilibrium model of the US economy being developed at Monash University in collaboration with the US International Trade Commission. In common with the MONASH model of Australia, USAGE is designed for four modes of analysis: Historical, where...

Empirical studies of economic growth across countries are abundant and rich in conclusions, some of them widely accepted. This is not the case, however, with the empirics of business cycles. Particularly, there exists little evidence explaining why some countries take more time than others...

The purpose of this paper is to examine whether the stock wealth effect of consumption exhibits structural change(s) or behaves asymmetrically over business cycles. We first perform a general test of linearity for the behavior of aggregate consumption in response to changes in stock wealth based...