This paper discusses the estimation of models of the term structure of interest rates. After reviewing the term structure models, specifically the Nelson-Siegel Model and Affine Term- Structure Model, this paper estimates the terms structure of Treasury bond yields for the United States with...

Bayesian Model Averaging (BMA) provides a coherent mechanism to address the problem of model uncertainty. In this paper we extend the BMA framework to panel data models where the lagged dependent variable as well as endogenous variables appear as regressors. We propose a Limited Information...

Many estimates of early-warning-system (EWS) models of currency crisis have reported incorrect standard errors because of serial correlation in the context of panel probit regressions. This paper documents the magnitude of the problem, proposes and tests a solution, and applies it to previously...

This study tests for the presence of real options effects induced by uncertainty and (partial) irreversibility on fixed capital investment using Italian company data. The approach recognizes that firm-level investment spending may, itself, be aggregated over multiple investment decisions in...

The paper proposes an algorithm that uses forecast encompassing tests for combining forecasts. The algorithm excludes a forecast from the combination if it is encompassed by another forecast. To assess the usefulness of this approach, an extensive empirical analysis is undertaken using a U.S....

Why do governments issue large amounts of debt? In what sense and for whom is such a policy optimal? We show that twisting the optimal taxation paradigm produces very reasonable predictions for debt and real interest rates. Adding an extra dimension of uncertainty about the political planning...

We provide empirical evidence that deviations from uncovered interest rate parity (UIP) display significant nonlinearities, consistent with theories based on transaction costs or limits to speculation. This evidence suggests that the forward bias documented in the literature may be less...

We propose a coherent unified approach to the study of the linkages among economic growth, financial structure, and inequality, bringing together disparate theoretical and empirical literature. That is, we show how to conduct model-based quantitative research on transitional paths. With...

We examine the effects of aid on growth-- in cross-sectional and panel data--after correcting for the bias that aid typically goes to poorer countries, or to countries after poor performance. Even after this correction, we find little robust evidence of a positive (or negative) relationship...

This paper provides a selective overview of nonlinear exchange rate models recently proposed in the literature and assesses their contribution to understanding exchange rate behavior. Two key questions are examined. The first question is whether nonlinear autoregressive models of real exchange...