We introduce a technique called "precomputation of integrals" that makes it possible to compute conditional expectations in dynamic stochastic models in the initial stage of the solution procedure. This technique can be applied to any set of equations that contains conditional expectations, in...

The Multiplicative Error Model introduced by Engle (2002) for positive valued processes is specified as the product of a (conditionally autoregressive) scale factor and an innovation process with positive support. In this paper we propose a multi-variate extension of such a model, by taking into...

This paper uses the invariance principle to solve the incidental parameter problem. We seek group actions that preserve the structural parameter and yield a maximal invariant in the parameter space with fixed dimension. M-estimation from the likelihood of the maximal invariant statistic yields...

The paper discusses prior elicitation for the parameters of dynamic stochastic general equilibrium (DSGE) models, and provides a method for constructing prior distributions for a subset of these parameters from beliefs about the moments of the endogenous variables. The empirical application...

The Multiplicative Error Model introduced by Engle (2002) for positive valued processes is specified as the product of a (conditionally autoregressive) scale factor and an innovation process with positive support. In this paper we propose a multi-variate extension of such a model, by taking into...

We present a model of stereotypes in which a decision maker assessing a group recalls only that group's most representative or distinctive types relative to other groups. Because stereotypes highlight differences between groups, and neglect likely common types, they are especially inaccurate...

Should the generosity of unemployment benefits and the progressivity of income taxes depend on the presence of business cycles? This paper proposes a tractable model where there is a role for social insurance against uninsurable shocks to income and unemployment, as well as inefficient business...

We propose a novel approach to deal with the problem of indeterminacy in Linear Rational Expectations models. The method consists of augmenting the original model with a set of auxiliary exogenous equations that are used to provide the adequate number of explosive roots in presence of...

Due primarily to the difficulty of obtaining ideal data, much remains unknown about how college majors are determined. We take advantage of longitudinal expectations data from the Berea Panel Study to provide new evidence about this issue, paying particular attention to the choice of whether to...

In conventional stochastic simulation algorithms, Monte Carlo integration and curve fitting are merged together and implemented by means of regression. We perform a decomposition of the solution error and show that regression does a good job in curve fitting but a poor job in integration, which...