Stylized facts show that the average growth rates of US per capitaconsumption and income differ in recession and expansion periods.Since a linear combination of such series does not have to be a constant meanprocess, standard cointegration analysis between the variables, toexamine the permanent...

Exchange rates typically exhibit time-varying patterns in both means andvariances. The histograms of such series indicate heavy tails. In thispaper we construct models which enable a decision-maker to analyze theimplications of such time series patterns for currency risk management.Our approach...

In this paper, we make use of state space models toinvestigate the presence of stochastic trends in economic time series. Amodel is specified where such a trend can enter either in the autoregressiverepresentation or in a separate state equation. Tests based on the formerare analogous to...

Adaptive Polar Sampling (APS) is proposed as a Markov chain Monte Carlomethod for Bayesian analysis of models with ill-behaved posteriordistributions. In order to sample efficiently from such a distribution,a location-scale transformation and a transformation to polarcoordinates are used. After...

In this paper, I study the wage a firm sets to attract high abilityworkers (hipo's) in situationsof unemployment. I show that the higher unemployment, the larger afirm's incentives to sorthigh and low ability workers. Moreover, workers will signal their(high) ability in situationsof (high)...

In this paper we present an exact maximum likelihood treatment forthe estimation of a Stochastic Volatility in Mean(SVM) model based on Monte Carlo simulation methods. The SVM modelincorporates the unobserved volatility as anexplanatory variable in the mean equation. The same extension...

We investigate the nature of the adverse selection problem in a market for adurable goodwhere trading and entry of new buyers and sellers takes place in continuoustime. In thecontinuous time model equilibria with properties that are qualitativelydifferent from thestatic equilibria, emerge....

In this paper we compare the predictive abilility of Stochastic Volatility (SV)models to that of volatility forecasts implied by option prices. We develop anSV model with implied volatility as an exogeneous var able in the varianceequation which facilitates the use of statistical tests for...

Accident costs are an important component of the external costs of traffic, a substantial part of whichis related to fatal accidents. The evaluation of fatal accident costs crucially depends on theavailability of an estimate for the economic value of a statistical life. The aim of the...

In this paper we investigate whether markets with heterogeneous network externalities can belocked-in by old technologies even if superior technologies are available. Heterogeneous networkexternalities are present when some consumers care more about the size of the market share of agood than...