Extreme market outcomes are often followed by a lack of liquidity and a lack of trade. This market collapse seems particularly acute for markets where traders rely heavily on a specific empirical model such as in derivative markets. Asset pricing and trading, in these cases, are intrinsically...

We inject aggregate uncertainty - risk and ambiguity - into an otherwise standard business cycle model and describe its consequences. We find that increases in uncertainty generally reduce consumption, but they do not account, in this model, for either the magnitude or the persistence of the...

Identi fication problems arise naturally in forward-looking models when agents observe more than economists. We illustrate the problem in several macro- finance models with Taylor rules. When the shock to the rule is observed by agents but not economists, identifi cation of the rule's parameters...