We use the neoclassical growth framework to model international capital flows in an economy with exogenous demographic change. We compare model implications and actual current account data and find that the model explains a small but significant fraction of capital flows between OECD countries,...

Since their opening up to international capital markets, the economies of Estonia, Latvia and Lithuania have experienced large and persistent capital inflows and trade deficits. This paper investigates whether a calibrated two-sector neoclassical growth model can explain the magnitudes and the...

For finite dimensional factor models, the paper studies general quadratic term structures. These term structures include as special cases the affine term structures and the Gaussian quadratic term structures, previously studied in the literature. We show, however, that there are other,...

In this paper we study a fairly general Wiener driven model for the term structure of forward prices. The model, under a fixed martingale measure, Q, consists of two infinite dimensional stochastic differential equations (SDEs). The first system is a standard HJM model for (forward) interest...

We consider forward rate rate models of HJM type, as well as more general infinite dimensional SDEs, where the volatility/diffusion term is stochastic in the sense of being driven by a separate hidden Markov process. Within this framework we use the previously developed Hilbert space realization...

In this paper, which is a substantial extension of the earlier essay Björk (2001), we give an overview of some recent work on the geometric properties of the evolution of the forward rate curve in an arbitrage free bond market. The main problems to be discussed are as follows. 1. When is a...