We prove a relationship between the bordered Hessian in an equality constrained extremum problem and the Hessian of the equivalent lower-dimension unconstrained problem. This relationship can be used to derive principal minor conditions for the former from the relatively simple and accessible...

This paper proposes a homotopy method for implementing counterfactual experiments in empirical models with multiple equilibria. A key assumption is that the equilibrium selection function does not jump discontinuously between equilibria as we continuously change the structural parameters.

When risk averse forecasters are presented with risk neutral proper scoring rules, they report probabilities whose ratios are shaded towards 1. If elicited probabilities are used as inputs to decision-making, naive elicitors may violate first-order stochastic dominance.

Standard macroeconomic models possess the undesirable feature that people stop working in the long run. Assuming standard parameters, the neoclassical model predicts that 2% of annual productivity growth leads to a 99% decline in the labor supply after 624 years. Yet, this contradicts the fact...

Using data for U.S. grocery and department store sales from 1919–1939, this paper shows that expected price changes have asymmetric effects on consumption spending. Department store sales (durable consumption) react negatively to expected deflation, but grocery sales (non-durable consumption)...

Credit cards offer a limit, rather than a specific loan size, at a pre-approved interest rate. This paper studies the determination of these credit limits jointly with default in the presence of one-period debt. I adapt the standard incomplete markets macroeconomic model of one-period unsecured...

This paper examines the role of habit formation in a standard state-dependent pricing (SDP) model. Incorporating habit formation helps the SDP model to generate hump-shaped and more persistent output responses under a monetary shock. More importantly, incorporating habit formation causes...

In the United States, the period between Thanksgiving and Christmas has long seen the most intense consumer sales and hence the most active economy. This period varies in length depending on the date of Thanksgiving. Years where it is longer see detectably larger seasonal increases in national...

New estimates of an aggregate long-term production function for the post-war U.S. economy are reported. The results indicate that this long-term aggregate production function exhibits a slight but statistically significant increasing returns to scale. Since virtually all econometric growth...

We use US county-level data to estimate convergence rates for 22 individual states. We find significant heterogeneity. E.g., the California estimate is 19.9% and the New York estimate is 3.3%. Convergence rates are essentially uncorrelated with income levels.