This paper examines the usefulness of a more refined business cycle classification for monthly industrial production (IP), beyond the usual distinction between expansions and contractions. Univariate Markov-switching models show that a three regime model is more appropriate than a model with...

A shift in the design of labor compensation occurred at around the mid-1980s in the U.S. and deals with an increased role of performance pay in driving the cyclical movements of wages. Using a DSGE model we show that this structural change accounts at least qualitatively for many observed...

This paper studies hours worked volatility and the cyclicality of human capital investments by embedding a Ben-Porath life-cycle model of human capital accumulation into an RBC setting. Agents differ across two dimensions: age and productivity in learning. Our results show that individuals...

We prove that the Generalized Taylor Principle, under which the nominal interest rate reacts more than one-for-one to a change in inflation in the long run, is a necessary and (under some extra mild restrictions on parameters) sufficient condition for determinacy in a sticky price model with...

This paper constructs a disequilibrium model in order to analyse the structural transition characterized by the emergence of a new sector. We show that, in an economy where preferences and technology adapt over time, multiple long-term outcomes are mainly brought about by different distributive...

I propose a consumption-based asset pricing model that jointly explains the high equity premium, the counter-cyclical behaviour of stock returns, the upward-sloping term structure of interest rates and the downward-sloping term structure of equity. The driving forces behind these results are...

This paper undertakes a Bayesian analysis of optimal monetary policy for the U.K. We estimate a suite of monetary-policy models that include both forward- and backward-looking representations as well as large- and small-scale models. We find an optimal simple Taylor-type rule that accounts for...

The paper provides evidence on the extent to which inflation expectations generated by a standard Christiano et al. (2005)/Smets and Wouters (2003)-type DSGE model are in line with what observed in the data. We consider three variants of this model that differ in terms of the behavior of, and...

Lévy processes have been successfully applied in the modeling of financial assets. Useful information such as implied volatility, skewness, and risk-preferences can be derived from market option prices. In this paper, we advocate using Esscher conjugate Lévy processes to estimate risk-neutral...

This paper studies optimal monetary policy in a framework that explicitly accounts for policymakers' uncertainty about the channels of transmission of oil prices into the economy. More specifically, using postwar US data, I examine the evolution of the policy recommendations originating from an...