Much of macroeconomics and finance employs stochastic difference equation descriptions of no-arbitrage or first-order conditions. A problem with empirical implementations of resulting present-values in the intertemporal decision rules and asset valuations of agents is that long-horizon forecasts...

Since the 70s, a wide stream of research has grown up on the presence of ``anomalies in the behavior of prices in financial markets. Both in the stock and the bond markets, many so called``puzzles were discovered, which were often explained resorting to factors such as agents heterogeneity,...

Risk-sensitive control problems are designed to exacerbate the response of decision rules to amount of uncertainty confronting the controllers. Alternatively, they can be thought of as providing an element of robustness to the decision rules. In economies populated by risk-sensitive agents, risk...

Perhaps the greatest technological innovation of the next several decades will be universal access and utilization of the Internet. Already congestion is becoming a serious impediment to efficient utilization. We introduce a stochastic equilibrium concept for a general mathematical model of the...

In this study we combine the dynamic programming method with the projection methods for solving stochastic growth models. One of the inconveniences of Judd's projection technique is that finding a good initial guess is not that easy or it is time costly especially when the dimensionality of the...

This paper considers a central bank with a zero inflation target and a fiscal authority with a differing objective. Situations under which the fiscal authority is able to exploit the central bank's commitment to zero inflation are examined. An example using a calibrated model shows that, in...

Standard microeconomics tells us that enforcing competition raises social welfare. Second we know form the theory of natural monopoly regulation that Ramsey-pricing will maximize your welfare function. This article tries to analyze a multiproduct enterprise producing in both, markets with...

Economics is the discipline of using data to revise beliefs about economic issues. In Bayesian econometrics, the revision is conducted in accordance with the laws of probability, conditional on what has been observed. The normative appeal of Bayesian econometrics is the same as that of expected...

In many situations that can be characterized as a prisoner's dilemma (PD) agents are not prisoners forced to play the game with whoever they face but are free to select their game partners. Opening the prison door adds an interesting dimension to the original game: players face two strategic...

Monte Carlo experiments establish that the usual ``t-statistic'' used fortesting for first-order serial correlation with artificial regressions is far from being distributed as a Student's t in small samples. Rather, it is badly biased in both mean and variance and results in grossly misleading...