The empirical literature studying the effects of fiscal policy shocks using VAR models differs among two important dimensions: the identification scheme and the VAR specification. Not surprisingly the results obtained are often diverse. The aim of this paper is to test whether differences in the...

The issue of quantifying the empirical relevance of the different channels of transmissions through which monetary policy exerts its influence on demand, output and prices has received wide and increasing attention in recent years. In this paper we examine under which conditions the different...

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...

This paper examines theoretically, using a two-country real-business-cycle model, the effects of capital-market liberalization when there is limited participation in national financial markets. It is assumed that workers cannot smooth consumption as well as do stockholders, and therefore,...

We study a dynamic general equilibrium model with production, in which a representative agent chooses an unobservable effort level. We cast the problem as a continuous time principal agent model. We study the problem of a central planner (the principal) choosing optimal allocations of...

We examine the long-run output-inflation trade-off under the assumption that firms face menu costs and set prices in a state dependent fashion. We argue that these characteristics capture the idea that the long-run output-inflation trade-off is driven by (predictable) trend inflation, and the...

The techniques to analyze time series generally use model identification and estimation procedures based on the stationarity assumption of the Data Generating Process (in short DGPs). This hypothesis is often violated when we study financial phenomena, that show non stationary features. When we...

The lion’s share of hidden Markov models (HMMs) /Markov regime switching models considered in economic research incorporates a comparably small number of states. The popularity of models with mostly two or three states principally results from their good interpretability: often regime...

In this paper we use a Dynamic Factor model to retrieve vulnerability indicators able to predict financial turmoil. A stochastic simulation experiment is then used to produce the corresponding probability forecasts regarding the currency crisis events a®ecting a number of East Asian countries...

While tests for unit roots and cointegration have important econometric and economic implications, they do not always offer conclusive results. For example, Rudebusch (1992; 1993) demonstrates that standard unit root tests have low power against estimated trend stationary alternatives. In addition,...