We study the behavior of experimental subjects who have to make a sequence of risky investment decisions in the presence of network externalities. Subjects follow a simple heuristic – investing after positive experiences and reducing their propensity to invest after a failure. This result...

Which are the main frictions and driving forces of business cycle dynamics in a small open economy? To answer this question we extend what is becoming the standard new Keynesian model in three dimensions. First, we incorporate frictions in the financing of the capital stock. Second, we model...

This paper describes the theoretical structure and estimation results for a DSGE model for the Macedonian economy. Having as benchmark the model of Copaciu et al. (2015), modified to allow for a fixed exchange rate, we are able to match relatively well the volatility observed in the data. Given...

We study the basic economic problem of choice between long-term and short-term commitments under a general characterization of uncertainty (aggregate uncertainty).When contingencies are contractible, a perfect market of Arrow-Debreau contingent claims implements the social optimum.When...

A seminal paper by Fama and Bliss (1987) showed that a simple regression model could explain a significant portion of 1-year ahead excess returns. Cochrane and Piazzesi (2005) showed that their regression model could explain a significantly larger por tion of excess returns than Fama and...

This paper reviews various approaches to the measurement of core inflation that have been proposed in recent years. The objective is to determine whether the ECB should pay special attention to one or other of these measures in assessing inflation developments in the euro area. I put particular...

This paper compares the forecasting performance of some leading models of inflation for the cross section of G-7 countries. We show that bivariate and trivariate models suggested by economic theory or statistical analysis are hardly better than univariate models. Phillips curve specifications...

In this paper, we consider the effect of a monetary union in a model with a significant role for financial market imperfections. We do so by introducing a financial accelerator into a stochastic general equilibrium model of a two country economy. We show that financial market imperfections...

This paper contributes to the literature on the impact of EMU on trade, adding two new elements. First, we propose a theoretical model for explaining how the euro could have increased trade by the large amounts found in the empirical literature. Second, we propose a sectoral dataset to test the...

This paper shows how to compute a second-order accurate solution of a non-linear rational expectation model using algorithms developed for the solution of linear rational expectation models. The result is a state-space representation for the realized values of the variables of the model. This...