In this paper we examine the risk situation facing individuals in the labor market. The current consensus in the literature is that the labor income process has a large random walk component. We argue two points. First, the direct estimates of this parameter (from labor income data) appear to be...

Standard RBC models predict forecastable movements in output, consumption and hours that differ from those obtained from a VAR estimated on US data. The paper investigates whether introducing bounded rationality and learning generates business cycles properties which are empirically plausible....

The first generation models of currency crises have often been criticized because they predict that, in the absence of very large triggering shocks, currency crises should be predictable and associated with small devaluations. This paper shows that these features of first generation models are...

We study how the use of judgement or add-factors in macroeconomic forecasting may disturb the set of equilibrium outcomes when agents learn using recursive methods. We isolate conditions under which "exuberance equilibria" exist in standard macroeconomic environments. These equilibria may...

We introduce learning based on genetic algorithms in a principal-agent model of optimal contracting under moral hazard. Applications of this setting abound in finance (credit under moral hazard), public finance (optimal taxation, information-constrained insurance), development (sharecropping),...

This paper studies Holmstrom's [1999] seminal model of career concerns, but considers that a small change in the beliefs about the agent's future productivity may imply a large change in his compensation---because, for example, the agent may be fired or promoted. This allows us to study how the...

We consider an economy where trade is decentralized and agents have incomplete information with respect to the value of money. Agents' learning evolves from private experiences and we explore how the formation of prices interacts with learning. We show that multiple equilibria arise, and...

Using data on Government of Canada securities auctions, this paper shows that in countries where direct access to primary debt issuance is restricted to government securities dealers, "order-flow" information is potentially the key source of private information for these security dealers....