In this paper we analyze dynamic incentives of a firm to invest in production facilities in a less developed country with lower wage costs and lower productivity. Foreign investment induces that, due to technological spillovers, productivity of local firms in the foreign country increases. Firms...

Abstract: The robust permanent income model discussed in a number of works, see e.g. Hansen et al. (1999, 2002), is reformulated as a linear quadratic tracking problem with a time-varying intercept following a ‘Return to Normality’ model. The results in Tucci (2005), which...

In this note a one-state, one-control variable quadratic linear problem with robust control and discount factor is developed to examine the optimal response of the first-period control to changes in future model uncertainty. A change in future model uncertainty has an effect on the optimal...

This paper builds upon the work by Tucci and Kendrick (2001) in which the authors develop a quadratic form version of the robust permanent income and pricing model described in Hansen, Sargent and Tallerini (1999). Then using the parameter values given on p. 18 of the HST paper they compute the...

Qualitative properties of optimal investment strategies for a firm with quadratic costs and non-concave revenues are analysed. Organising information in a bifurcation diagram, it is found that the organising centre of the diagram is a so-called swallow-tail singularity. This implies the...

In this paper an analytical framework using robust control was developed for the one-state and one-control variable model to examine the response of the control to changes in the "free" parameter. However, in contrast to Gonzalez and Rodriguez (2003), the sign of the ``free" parameter in the...

A number of continuous models to explain the influence of some parameters (e.g. advertising) on the diffusion of an innovation have been proposed since the seminal paper by Bass (1969). Only some recent papers deal with both spatial and temporal features as, i.e., De Cesare et al. (2003). There...

By following the spirit in Favero and Milani (2005), we use recursive thick modeling to take into account model uncertainty for the choice of optimal monetary policy. We consider an open economy model and generate multiple models for only the aggregate demand and aggregate supply. Models are...