I measure the importance of sectoral shocks in US aggregate output by using the World Input–Output Table (WIOT). The WIOT allows me to correct potential sub-graph bias in previous literature, caused by using only the US industrial production input–output table. I report results from three...

Suppose a fund manager uses predictors in changing portfolio allocations over time. How does predictability translate into portfolio decisions? To answer this question we derive a new model within the Bayesian framework, where managers are assumed to modulate the systematic risk in part by...

In this note, we provide the application of HCCME-type refinements to nonlinear GMM models with Bayesian interpretations.

Using GARCH models for density prediction of stock index returns, a comparison is provided between frequentist and Bayesian estimation. No significant difference is found between qualities of whole density forecasts, whereas the Bayesian approach exhibits significantly better left-tail forecast...

Exchange rate arrangements and trade are inherently connected. Exchange rate volatility has a significant impact on trade volumes, and trading partners thus could affect each other’s exchange rate regime choice. This spatial effect among trading partners has been overlooked in empirical...

A trade-off exists between the Gelfand and Dey (1994) and Chib (1995) methods to calculate the marginal likelihood in Bayesian estimation. Using the Markov Chain Monte Carlo method, we demonstrate that the performance of the two methods is fairly close.

We study a benchmark model with collateral constraints and heterogeneous discounting. Contrarily to a rich literature on borrowing limits, we allow for rental markets. By incorporating this missing market, we show that impatient agents choose to rent rather than to own the collateral in the...

We resolve the non-existence pathologies of dynamic rational expectations equilibria attributed to signal extraction from endogenous variables first discovered by Futia (1981). Non-existence is overturned once it is recognized that rational agents take into account the structure of the model...

I use a multivariate Blanchard–Quah decomposition to investigate the financial crisis’ impact on potential output in the Euro area, the US, Japan, and the UK. I detect an impact for all countries, which is especially severe for the UK.

This paper shows that the empirically documented disinflationary nature of news shocks is consistent with the implications of a sensibly modified version of a New Keynesian model, even if capital is introduced to the model. The modification proposed in the current paper, however, is different...