Non-strategic firms with rational expectations make investment and emissions decisions. The investment rule depends on firms' beliefs about future emissions policies. We compare emissions taxes and quotas when the (strategic) regulator and (nonstrategic) firms have asymmetric information about...

Estimating linear rational expectations models requires replacing the expectations of future, endogenous variables either with forecasts from a fully solved model, or with the instrumented actual values, or with forecast survey data. Extending the methods of McCallum (1976) and Gottfries and...

This paper analyzes conditions for existence of a strongly rational expectations equilibrium (SREE) in models with private information, where the amount of private information is endogenously determined. It is shown that the conditions for existence of a SREE known from models with exogenously...

Each worker belongs to either the majority or the minority group and, irrespective of the group she belongs to, can have good or bad work habits. These traits are transmitted from one generation to the next through a learning and imitation process which depends on parents' purposeful investment...

One empirical argument that has been around for some time and that clearly contra- dicts equity market efficiency is that market prices seem too volatile to be optimal estimates of the present value of future discounted cash flows. Based on this, it is deduced that systematic pricing errors...

In this note, a class of nonlinear dynamic models under rational expectations is studied. A particular solution is found using a model reference adaptive technique via an extended Kalman filtering algorithm, for which initial conditions knowledge only is required.

In this paper we incorporate the term structure of interest rates in a standard inflation forecast targeting framework.We find that under flexible inflation targeting and uncertainty in the degree of persistence in the economy, allowing for active learning possibilities has effects on the...

Dynamic modeling of demand for goods whose cumulated stocks enter an intertemporal utility function as latent variables, is discussed. The issues include: how represent addiction, how handle unobserved expectations and changing plans, how deal with 'dynamic inconsistency'? Arguments are put...

The purpose of this paper is to show how to solve linear dynamic rational expectations models with anticipated shocks by using the generalized Schur decomposition method. Furthermore, we determine the optimal unrestricted and restricted policy responses to anticipated shocks. We demonstrate our...

Qualitative surveys enjoy huge popularity among business cycle analysts and research institutes since they provide fast information on the stance of the economy. However, in order to derive quantitative statements researchers have to rely on assumptions about the relation between quantitative...