The conditional equity premium in the model with production is often approximated by assuming a jointly log-normal distribution of the marginal rate of substitution in consumption and the marginal productivity of capital. We show that, for standard parameterization, this premium is about one...

It is well understood that the two most popular empirical models of location choice - conditional logit and Poisson - return identical coefficient estimates when the regressors are not individual specific. We show that these two models differ starkly in terms of their implied predictions. The...

In this paper, we study the statistical properties of heterogeneous agent models with incomplete markets. Using a Bewley-Hugget-Aiyagari model we compute the equilibrium density function of wealth and show how it can be used for likelihood inference. We investigate the identifiability of the...

Established tests for proper calibration of multivariate density forecasts based on Rosenblatt probability integral transforms can be manipulated by changing the order of variables in the forecasting model. We derive order invariant tests. The new tests are applicable to densities of arbitrary...

Business cycle indicators are important instruments for monitoring economic development. When employing indicators one usually relies on a sound statistical database. This paper deals with indicator development in a sparse data situation. Indicator building is merged with temporal...

It is widely understood that the real price of globally traded commodities is determined by the forces of demand and supply. One of the main determinants of the real price of commodities is shifts in the demand for commodities associated with unexpected fluctuations in global real economic...

This paper presents a review of the most significant fiscal rules policymakers can choose from. The insights from this review are then applied to the current budgetary situation of the European Union. In the European Union, the supranational Stability and Growth Pact (SGP) should provide the...

This paper studies the aggregate and distributional implications of Markov-perfect tax-spending policy in a neoclassical growth model with capitalists and workers. Focusing on the long run, our main findings are: (i) it is optimal for a benevolent government, which cares equally about its...

This paper derives and estimates rules for fiscal policy that prescribe the optimal response to changes in unemployment and debt. We combine the reduced-form model of the economy from a linear VAR with a non-linear welfare function and obtain analytic solutions for optimal policy. The variables...

We welfare rank various tax-spending policies. The setup is a New Keynesian model of a semi-small open economy featuring sovereign risk premia and loss of monetary policy independence. The model is calibrated to match data from the Italian economy 2001-2011. We compute various optimized...