This paper uses Whiteman's(1986) frequency-domain optimization methodology to parameterize the precommitment period in a standard rational expectations policy design model. This allows researchers to adopt an empirical approach to the time consistency issue. That is, the operative commitment...

This paper studies a class of models developed by Townsend (1993) and Sargent (1991). These models feature dynamic signal extraction problems in which firms with heterogeneous information draw inferences from endogenously generated time series about the value of common persistent shock. Because...

This paper compares the ability of four discount rate models to explain the cross-sectional and time-series variation of stock returns in the U.S., Japan, England, Germany, and Canada. The data consist of quarterly returns (in dollars) on Morgan Stanley's Capital International indices for the...

Following Campbell (1987) and Campbell and Shiller (1987), many papers have evaluated the intertemporal approach to the current account by testing restrictions on a Vector Autoregression (VAR). The attractiveness of the Campbell-Shiller methodology is that it is thought to be immune to omitted...

This paper studies a competitive banking industry subject to common and idiosyncratic shocks. The induced correlation across bank portfolio returns can be used by a regulator to improve inferences about bank portfolio choices. We compare two types of closure rules: (1) an 'absolute closure...