This paper extends a Real Business Cycle model to an economy in which monopolistic competitive firms’ technology is subject to idiosyncratic and common shocks. The value of future technology rents drive stock market valuation. We study how the arrival of new information about future...

We study the optimal choice of quasi-likelihoods for nearly integrated,possibly non-normal, autoregressive models. It turns out that the two mostnatural candidate criteria, minimum Mean Squared Error (MSE) and maximumpower against the unit root null, give rise to different...

We provide new evidence in favor of the expectation hypothesis (EH) as a long-run theory of the term structure of interest rates. Using nonparametric techniques, we show that the results of conventional tests that reject the EH are affected by the presence of extreme observations -- only a...

Ways of improving the efficiency of Monte-Carlo (MC) techniques are studied for dynamic models. Such models cause the conventional Antithetic Variate (AV) technique to fail, and will be proved to reduce the benefit from using Control Variates with nearly nonstationary series. This paper suggests...

The well-known transformation theorem (or change-of-variables theorem) is difficult to prove, requiring knowledge of theorems in advanced analysis. For this reason, it is stated without proof in all the statistics textbooks we know of. Here, we provide a new and much simpler proof, by exploiting...