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 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 most of the recent macroeconomics literature, the sticky reaction of prices in response to changes in aggregate conditions has been modelled following the highly influential contribution of Calvo (1983). However, this approach has difficulties in accounting for some well-established stylized...

In this paper we incorporate the term structure of interest rates in a standard inflation forecast targeting framework. Learning about the transmission process of monetary policy is introduced by having heterogeneous agents - i.e. the central bank and private agents - who have different...

The paper recognizes that expectations and the process of their formation are subject to standard decision making and are determined as a part of equilibrium. Accordingly, the paper presents a basic framework in which the form of expectation formation is a choice variable. At any point in time...

We consider the behavior of the price of a continuously stored commodity, for which discounted price is a non-constant martingale, and thus not-predictable. We prove that the discounted price realization is within any given neighborhood of zero, with any given probability less than 1, beyond a...

This paper incorporates the systematic risk of regime shifts into a general equilibrium model of the term structure of interest rates. The model shows that there is a new source of time-variation in bond term premiums in the presence of regime shifts. This new component is a regime-switching...

This paper uses the flexible approach of Hamilton (2001) to investigate the nature of nonlinearities in the term structure. The paper reports clear evidence of nonlinearity, in contrast to the affine term structure model and consistent with recent claims in the literature. We find that there is...

This paper integrates two strands of studies on consumer demand and consumption and provides a unified framework for analyzing consumer behavior employing an intertemporal two-stage budgeting procedure. We take a modified AIDS framework for the demand system and derive a general Euler equation...

This paper analyzes price formation and dynamics according to the industry structure. It divides manufacturing industries of Mexico into two groups: perfectly and imperfectly competitive. The results show that imperfectly competitive industries predominate. Then this classification is used to...