We discuss the relative advantages and disadvantages of four types of convenient estimators of binary choice models when regressors may be endogenous or mismeasured, or when errors are likely to be heteroskedastic. For example, such models arise when treatment is not randomly assigned and...

This paper investigates the link between the optimal level of non-financial firms' liquid assets and uncertainty. We develop a partial equilibrium model of precautionary demand for liquid assets showing that firms alter their liquidity ratio in response to changes in either macroeconomic or...

I develop a tractable, two-country, real model of macroeconomic interdependence with a role for net foreign asset dynamics. Absence of Ricardian equivalence in an overlapping generations structure ensures existence of a well-defined, endogenously determined, steady-state, international...

We find that U.S. corporations' demand for liquidity is sensitive to two important factors: uncertainty facing the firm and the quality of corporate governance. Following prior research, we find that both factors have important influences on firms' cash holdings. Our results also indicate that...

In this paper we consider endogenous regressors in the binary choice model under a weak median exclusion restriction, but without further specification of the distribution of the unobserved random components. Our reduced form specification with heteroscedastic residuals covers various...

This paper extends a New Keynesian model to include roles for currency and deposits as competing sources of liquidity services demanded by households. It shows that, both qualitatively and quantitatively, the Barnett critique applies: While a Divisia aggregate of monetary services tracks the...

We compare the performance of a currency board arrangement, inflation targeting, and dollarization in a small open, developing economy with liberalized capital account. We focus explicitly on the transmission of shocks to currency and country risk premia in international financial markets and on...

This paper provides a few variants of a simple estimator for binary choice models with endogenous or mismeasured regressors, or with heteroskedastic errors. Unlike control function methods, which are generally only valid when endogenous regressors are continuous, the estimators proposed here can...

This paper provides numerically trivial estimators for short panels of either binary choices or of linear models that suffer from confounded, nonignorable sample selection. The estimators allow for fixed effects, endogenous regressors, lagged dependent variables, and heterokedastic errors with...

I compare the performance of alternative monetary rules for Canada using an open economy model under incomplete markets. Different rules generate different paths for the markup and the terms of trade. A comparison of welfare levels suggests that flexible inflation targeting, the Bank of...