This paper develops a discrete state space solution method for a class of nonlinear rational expectations models. The method works by using numerical quadrature rules to approximate the integral operators that arise in stochastic intertemporal models. It is particularly useful for approximating...

The extent to which specification error can explain rejection of the intertemporal capital asset pricing model is investigated using seminonparametric representations of the law of motion and utility. The authors find (1) consumption growth and asset returns display conditional heterogeneity,...

Methods for nonlinear impulse response analysis are introduced. The methods are based on conditional moment profiles defined for a stationary time series. Comparing conditional moment profiles to baseline profiles is the nonlinear analog of conventional impulse-response analysis. The bootstrap...