Empirical studies looking for changes over time in exchange rate pass-through to consumer prices generally consider the context of a changing inflation mean to examine this issue. This paper allows for endogeneity in exchange rate movements and proposes a new method to test this hypothesis for...

While tests for unit roots and cointegration have important econometric and economic implications, they do not always offer conclusive results. For example, Rudebusch (1992; 1993) demonstrates that standard unit root tests have low power against estimated trend stationary alternatives. In addition,...

We quantify the inefficiency of the retirement component of the US social security system within a model where agents receive idiosyncratic labor-productivity shocks that are privately observed

This paper considers two models to deal with an outcome variable that contains a large fraction of zeros, such as individual expenditures on health care: a sample-selection model and a two-part model. The sample-selection model uses two possibly correlated processes to determine the outcome: a...

This paper compares the goodness-of-fit and the stability of six methods used to extract risk-neutral probability density functions from currency option prices. We first compare five existing methods commonly employed to recover risk-neutral density functions from option prices. Specifically, we...

This paper investigates the aggregate fluctuations in production and demand components when a firm's investment decision takes the form of (S,s) policies. In the field of large-dimensional non-linear dynamical systems, it is a commonly accepted view that a system of coupled non-linear...

Previous efforts to compare the costs and benefits of fixed versus flexible exchange rate regimes have ignored the fact that it takes significant resources and time to develop export markets, and they have not included an analysis of the firm-level decision to enter or exit export markets. This...

Recently, there has been many applications of perturbation methods for solving stochastic dynamic general equilibrium models. However, in standard applications of the perturbation method, the Taylor expansion is always computed around the deterministic steady state. Because of nonlinearities,...

We analyze the microfoundations of the Phillips curve, a key relationship in general macroeconomics and models of monetary policy in particular. The form in current widespread use includes both forward looking expected inflation and lagged inflation. The presence of lagged inflation is necessary...

In this paper, we investigate the out-of-sample forecasting ability of a genetic program to approach the dynamic evolution of the Yen/US$ and Pound Sterling/US$ exchange rates, and verify whether the method can beat the random walk model. Later on, we use the predicted values to generate a...