We estimate a production-based general equilibrium model featuring demand- and supply-side uncertainty and an endogenous term premium. Using term structure and macroeconomic data, we find sizable effects of uncertainty on risk premia and business cycle fluctuations. Both demand- and supply-side...

We propose a novel approach to deal with the problem of indeterminacy in linear rational expectations models. The method consists of augmenting the original state space with a set of auxiliary exogenous equations to provide the adequate number of explosive roots in presence of indeterminacy. The...

We propose a novel approach to deal with the problem of indeterminacy in linear rational expectations models. The method consists of augmenting the original state space with a set of auxiliary exogenous equations to provide the adequate number of explosive roots in presence of indeterminacy. The...