The current account in developed countries is highly persistent and volatile in comparison to output growth. The standard intertemporal current account model with rational expectations (RE) fails to account for the observed current account dynamics together with persistent changes in...

In this paper, we establish the consistency of the model selection criterion based on the quasi-marginal likelihood (QML) obtained from Laplace-type estimators. We consider cases in which parameters are strongly identified, weakly identified and partially identified. Our Monte Carlo results...

The search for new ideas by profit-seeking firms and knowledge spillovers are well-known and fundamental sources of modern economic growth. This paper examines the implications of idea production and knowledge capital for monetary business cycles. We construct a sticky-wage model where workers...

This paper investigates the finite sample properties of the two-step estimators of dynamic factor models when unobservable common factors are estimated by the principal components methods in the first step. Effects of the number of individual series on the estimation of an auto-regressive model...

At the aggregate level, the evidence that deviations from purchasing power parity (PPP) are too persistent to be explained solely by nominal rigidities has long been a puzzle (Rogoff, 1996). Another puzzle from the micro price evidence of the law of one price (LOP), which is the basic building...