This note presents a simple method for estimating the state vector of linearized DSGE models without using the Kalman filter. The conditional covariance matrix of the state vector is also derived. The method can easily cope with filtered data, and with arbitrary patterns of missing observations.

We introduce an envelope condition method (ECM) for solving dynamic programming problems. The ECM method is simple to implement, dominates conventional value function iteration and is comparable in accuracy and cost to Carroll’s (2005) endogenous grid method. Codes are available.

We analyze a strategic trading model where an overconfident insider is required to publicly disclose his trades after the fact. We find the more confident insider is more concerned about the effect the initial trading has on the future.

A simple Monte Carlo calibration approach is implemented in a GE model with uninsurable employment risk to quantitatively study the optimal replacement rate of a public unemployment insurance (UI) scheme. The optimal UI sampling distribution is found to be bimodal.

In recent years models with a nested constant elasticity of substitution utility function and heterogeneous firms involved in some form of competition have become popular in the international trade literature. This paper considers one particular model of this class — with firms competing in...

The U.S. prewar output series exhibit smaller shock-persistence than postwar-series. Some studies suggest that this may be due to linear interpolation used to generate missing prewar data. Monte Carlo simulations that support this view generate large standard-errors, making such inference...

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...