Using a version of the Smets-Wouters model of the US economy augmented to include both New Keynesian and New Classical sectors, this paper investigates the performance of inflation targeting and price-level targeting when the zero lower bound on nominal interest rates is occasionally-binding....

This paper investigates the long-term impact of price-level targeting on social welfare in an overlapping generations model in which the young save for old age by investing in productive capital and indexed and nominal government bonds. A key feature of the model is that the extent of bond...

In the context of an autoregressive panel data model with fixed effect, we examine the relationship between consistent parameter estimation and consistent model selection. Consistency in parameter estimation is achieved by using the tansformation of the fixed effect proposed by Lancaster (2002)....

We present a search-and-matching model of the housing market where potential buyers' willingness to pay is private information and sellers may become desperate as they are unable to sell. A unique steady state equilibrium exists where desperate sellers offer sizeable price cuts and sell faster....

This paper argues that the cross-sectional approach to durations is essential to understand nominal rigidity because this captures the fact that price-spells are generated by firms' price-setting behavior. Since the distribution of durations is dominated by a proliferation of short contracts,...

The seminal Barro (2006) closed-economy model of the equity risk premium in the presence of extreme events (disasters) allowed for leverage in the form of risky corporate debt which defaulted only in states when the Government defaulted on its debt. The probability of default was therefore...

We show a simple way to introduce monopolistic competition in a general equilibrium model where prices are fully .exible, the velocity of money is variable and cash-in-advance (CIA) constraints occasionally bind.We establish the conditions under which money has real effects and demonstrate that...

A pervasive empirical finding for the US economy is that inflation is negatively correlated with the normalized market price of capital (Tobin's q) and growth. A dynamic stochastic general equilibrium model of endogenous growth is developed to explain these stylized facts. In this model, human...

Following Lancaster (2002), we propose a strategy to solve the incidental parameter problem. The method is demonstrated under a simple panel Poisson count model. We also extend the strategy to accomodate cases when information orthogonality is unavailable, such as the linear AR(p) panel model....