Reference–dependent preference models assume that agents derive utility fromdeviations of consumption from benchmark levels, rather than from consumptionlevels. These references can be either backward-looking (as explicit in the Habit literature) or forward-looking (as implicitly suggested by...

This paper proposes a new wealth-dependent utility function for the inter-temporal consumption and portfolio problem, in which the subsistance (bliss) con-sumption level is a function of wealth. Ratchet effects obtain when higher wealth in-creases the subsistance consumption level; blas´...

This paper analyzes the important time variation in U.S. aggregate portfolio allocations. To do so, we first use flexible descriptions of preferences and investment opportunities to derive optimal decision rules that nest tactical, myopic, and strategic portfolio allocations. We then compare...

Several authors have shown that there exists a significant relationship between the term structure of interest rates and future changes in the rate of inflation. More recently, this relationship has been strengthened through the introduction of nonlinearities and regime shifts. This paper...

In this paper, we investigate the information content of implied probabilities (Back and Brown, 1993) to improve estimation in unconditional moment conditions models. We propose and evaluate two 3-step euclidian empirical likelihood estimators and their bias-correction versions for weakly...

The New Keynesian Phillips Curve is at the center of two raging empirical debates. First, how can purely forward looking pricing account for the observed persistence in aggregate inflation. Second, price-setting responds to movements in marginal costs, which should therefore be the driving force...