This article describes a method for solving the one-good stochastic growth model by parameterizing the expectations part of the stochastic Euler equation. The conditional expectation is specified as a function of the state of the system, and the parameters of that function are estimated to solve...

This paper analyzes the relationship between the short-term interest rate and diversity (i.e., the number of types) in models with heterogeneous agents and incomplete markets. The number of types needed to approximate a continuum varies across examples. In all cases, however, the number of types...

This note describes how the incomplete markets model with aggregate uncertainty in Den Haan et al. [Comparison of solutions to the incomplete markets model with aggregate uncertainty. Journal of Economic Dynamics and Control, this issue] is solved using standard quadrature and projection...

This paper looks at the responses of bank loan components to a monetary tightening and compares the responses to those observed to output shocks. We find the results to be consistent with both a bank lending channel and a balance sheet channel for consumer loans. In contrast, wee find that C&I...

The authors investigate, by Monte Carlo methods, the finite sample properties of generalized method of moments procedures for conducting inference about statistics that are of interest in the business cycle literature. These statistics include the second moments of data filtered using the first...

This paper studies the short run correlation of inflation and money growth. We study whether a model of learning does better or worse than a model of rational expectations, and we focus our study on countries of high inflation. We take the money process as an exogenous variable, estimated from...

We study the effect on the growth of an economy of alternative financing opportunities in a stochastic growth model with incentive constraints. Efficient accumulation mechanisms are designed and computed for economies that differ in their incentive structure. We show that when borrowing is...

This paper develops the Parameterized Expectations Approach (PEA) for solving nonlinear dynamic stochastic models with rational expectations. The method can be applied to a variety of models, including models with strong nonlinearities, sub-optimal equilibria, and many continuous state...

In this paper the authors explore the ability of simple monetary models with bounded rationality to account for the joint distribution of money and prices. They impose restrictions on the size of the mistakes agents can make in equilibrium and argue that countries with high inflation are likely...