We analyze an overlapping generations economy where agents interact to share liquidity risk. We show that a pure exchange economy has excessive trade in equilibrium because agents interact to rebalance their portfolios. Intergenerational financial intermediaries reduce the number of interactions...

The Herzer et al. (2014) comment on our article (Lof et al., 2014) addresses two issues. First, they propose various ways to circumvent our concerns regarding data handling in a paper by Nowak-Lehmann et al. (2012). We point out that under these new approaches the link between the empirical...

This study provides a replication of the empirical results reported by Nowak-Lehmann, Dreher, Herzer, Klasen, and Martínez-Zarzoso (2012) (henceforth NDHKM). We uncover that NDHKM relied on a regression model which included a log transformation of variables that are not strictly positive. This...

There is hope for the generalized method of moments (GMM). Lanne and Saikkonen (2011) show that the GMM estimator is inconsistent, when the instruments are lags of noncausal variables. This paper argues that this inconsistency depends on distributional assumptions, that do not always hold. In...

In a recent article, Nowak-Lehmann, Dreher, Herzer, Klasen, and Mart.nez-Zarzoso (2012) (henceforth NDHKM) conclude that foreign aid has not had a significant effect on income, based on evidence from panel data potentially covering 131 countries over the

We estimate panel vector autoregressions to analyze the highly disputed relationship between sovereign debt and economic growth. Using data on 20 developed countries, we find no evidence for a robust effect of debt on growth, even for higher levels of debt. We do find a significant negative...

This paper applies a heterogeneous agent asset pricing model, featuring fundamentalists and chartists, to the price-dividend and price-earnings ratios of the S&P500 index. Agents update their beliefs according to macroeconomic information, as an alternative to evolutionary dynamics. For...

Stock prices often diverge from measures of fundamental value, which simple present value models fail to explain. This paper tries to find causes for these long-run price movements and their persistence by estimating a STAR model for the price-earnings ratio of the S&P500 index for 1961Q1 -...