The presence of mean reversion in profitability at the firm level is important for valuation and prediction of growth and earnings. We investigate the mean reversion in accounting profitability for Norwegian non-listed firms for the period 1988-2006. We find a mean reversion rate of about 0.44....

We investigate the relationship between bankruptcy risk and expected future sales growth for Norwegian non-listed firms for the period 1988-2007. We find that firms with high bankruptcy risk also have high expected future growth. Financial ratios characterizing firms with high bankruptcy risk...

This paper explores how government size affects the scope for equilibrium indeterminacy in a New Keynesian economy where part of the population live hand-to-mouth. I find that in this framework, a larger public sector may widen the scope for self-fulfilling prophecies to occur. This takes place...

While the new capital adequacy framework, Basel II, aims to make the banks’ capital requirements more sensitive to the underlying risk of the assets, it may also introduce an additional source of procyclicality in the banking sector. A growing share of the literature has assessed the potential...

With regard to the recent US house price cycle, we analyze how the interaction between housing supply restrictions, mortgage credit constraints and a price-to-price feedback loop affects house price volatility. Considering 247 Metropolitan Statistical Areas, we estimate a simultaneous boom-bust...

We study the interaction between monetary policy and household debt dynamics. To this end, we develop a dynamic stochastic general equilibrium model where household debt is amortized gradually, and only new loans are constrained by the current value of collateral. Long-term debt implies that...

We estimate demand, supply, monetary, investment and financial shocks in a VAR identified with a minimum set of sign restrictions on US data. We find that financial shocks are major drivers of fluctuations in output, stock prices and investment but have a limited effect on inflation. In a second...

In this paper we show analytically, with simulation experiments and with actual data that a mismatch between the time scale of a DSGE model and that of the time series data used for its estimation generally creates identfication problems, introduces estimation bias and distorts the results of...

We investigate the macroeconomic consequences of .uctuations in the effectiveness of the labor-market matching process with a focus on the Great Recession. We conduct our analysis in the context of an estimated medium-scale DSGE model with sticky prices and equilibrium search unemployment that...

Progress on the question of whether policymakers should respond directly to financial variables requires a realistic economic model that captures the links between asset prices, credit expansion, and real economic activity. Standard DSGE models with fully-rational expectations have difficulty...