This paper examines the predictions of expectations-based reference-dependent models for risk-apportionment tasks that elicit higher-order risk attitudes. We consider some of the most commonly used specifications of Kőszegi and Rabin (2006, 2007) and disappointment aversion models. Our analysis...

This paper examines the predictions of expectations-based reference-dependent models for risk-apportionment tasks that elicit higher-order risk attitudes. We consider some of the most commonly used specifications of Kőszegi and Rabin (2006, 2007) and disappointment aversion models. Our analysis...

This paper adopts a nonlinear framework to model the deviations of the real exchange rate from its fundamental value implied by International Real Business Cycle models with complete asset markets. By focusing on the post Bretton Woods era, we find that in several cases there is a long run...

A stylized fact of US inflation dynamics is one of extreme persistence and possible unit root behavior. If so, the implications for macroeconomics and monetary policy are somewhat unpalatable. Our econometric analysis proposes a parsimonious representation of the inflation process, the nonlinear...

We analyze the nonlinear behavior of the information content in the spread for future real economic activity. The spread linearly predicts one year ahead real growth in nine industrial production sectors of the US and four of the UK over the last forty years. However, recent investigations on...