Via the use of rolling regression technique and a specific procedure for analyzing strong structural breaks in a univariate time series model, we forecast the rate of future inflation in Finland for the time period of unregulated financial markets since the beginning of 1987. We are able to...

Traditional specifications of export equations incorporate foreign demand as a demand pull factor and the real exchange rate as a relative price variable. However, such standard export equations have failed to explain the export performance of euro area countries during the crisis period. In...

Traditional specifications of export equations incorporate foreign demand as a demand pull factor and the real exchange rate as a relative price variable. However, such standard export equations have failed to explain the export performance of euro area countries during the crisis period. In...

This paper solves the canonical dynamic rational inattention problem of Sims (2003) by formulating it in the frequency domain. The solution complements and extends existing results, which have been derived in the time domain. The paper provides a simple algorithm that quickly and accurately...

We experimentally evaluate three behavioral models of expectation formation that predict overreaction to new information: overconfidence in private signals, misperceptions about the persistence of the data-generating process (DGP), and diagnostic expectations. In our main experiment,...

This paper is an empirical study of the links between monetary variables and inflation based on Cagan`s equation and its rational expectations solution, when the forcing variable is a fractionally integrated process. As demonstrated by Hamilton and Whiteman, the existence of bubbles and other...

We present a framework for interpretation of the empirical results of New Keynesian models of inflation dynamics. Both the rational expectations solution of the structural New Keynesian Phillips curve, NKPC, and the reduced form VAR analysis of the multivariate time series properties give...

This paper verifies the endogenous mechanism and economic intuition on volatility clustering using the coexistence of two locally stable attractors proposed by Gaunersdorfer, Hommes and Wagener (2008). By considering a simple asset pricing model with two types of boundedly rational traders,...

I consider a consumption based asset pricing model where the consumer does not know if shocks to dividends are stationary (temporary) or non-stationary (permanent). The agent uses a Bayesian learning algorithm with a bias towards recent observations to assign probability to each process. While...