A large body of microeconomic evidence supports Friedman (1957)'s proposition that household income can be reasonably well described as having both transitory and permanent components. We show how to modify the widely-used macroeconomic model of Krusell and Smith (1998) to accommodate such a...

Abstract: An important part of external or policy shocks is transmitted throughout the economy via various channels of transactions. To analyse such channels and to predict the impact of shocks, it is expedient to know who recently exchanged what with whom and for what purpose. The most...

In this paper we derive a Phillips curve with a role for higher order expectations of marginal cost and future inflation. We introduce a small idiosyncratic component in firms’ marginal costs and let the economywide average marginal cost be unobservable to the individual firm. The model can...

The aim of this paper is to improve our understanding of the key determinants of intra- and extra-euro area imports. Using a simultaneous equation estimation framework, and pooling the data across nine euro area countries as an approximation of the euro area, we estimate intra- and extra-euro...

This paper asks two questions. First, can we detect empirically whether the shocks recovered from the estimates of a structural VAR are truly structural Second, can the problem of nonfundamentalness be solved by considering additional information? The answer to the first question is “yes”...

The Bayesian Estimation, Analysis and Regression toolbox (BEAR) is a comprehensive (Bayesian) (Panel) VAR toolbox for forecasting and policy analysis. BEAR is a MATLAB based toolbox which is easy for non-technical users to understand, augment and adapt. In particular, BEAR includes a...

The Bayesian Estimation, Analysis and Regression toolbox (BEAR) is a comprehensive (Bayesian) (Panel) VAR toolbox for forecasting and policy analysis. BEAR is a MATLAB based toolbox which is easy for non-technical users to understand, augment and adapt. In particular, BEAR includes a...

This paper asks two questions. First, can we detect empirically whether the shocks recovered from the estimates of a structural VAR are truly structural? Second, can the problem of nonfundamentalness be solved by considering additional information? The answer to the first question is "yes" and...

We study the aggregate implications of sectoral shocks in a multi-sector New Keynesian model featuring sectoral heterogeneity in price stickiness, sector size, and input-output linkages. We calibrate a 341 sector version of the model to the United States. Both theoretically and empirically,...

In this article, we use a stylized model of the labor market to investigate the effects of three alternative and well-known bargaining solutions. We apply the Nash, the Egalitarian and the Kalai-Smorodinsky bargaining solutions in the small firm's matching model of unemployment. To the best of...