It is commonly argued that exchange rate risk depresses international trade. However, the large literature on this subject has not yet provided conclusive evidence. This paper analyzes why it is so difficult to obtain a clear answer from time series analyses. We use data on bilateral aggregate...

In this paper, we study the invariance properties of various test criteria which have been proposed for hypothesis testing in the context of incompletely specified models, such as models which are formulated in terms of estimating functions (Godambe, 1960) moment conditions and are estimated by...

We extend the result of Ross (1976) that European options generate complete markets from the single-period to a multiperiod setting. We find that multiperiod European options on a trading strategy generate dynamic completeness for every arbitrage-free price process, provided that the trading...

Entrepreneurs hold a significant fraction of the total wealth in the economy; they are approximately 8% of the population but hold 39% of total net worth. In this paper, we construct and solve numerically a life cycle optimization model with intergenerational transmission of bequests to study...

This paper explores the implications of precautionary saving and life cycle behavior for business cycle fluctuations. Existing heterogenous agent models of the business cycle, with labor income uncertainty and incomplete markets, yield aggregate quantitative predictions that are almost...

In this paper we consider efficient estimation in semiparametric ACD models. We consider a suite of model specifications that impose less and less structure. We calculate the corresponding efficiency bounds, discuss the construction of efficient estimators in each case, and study tvide a...

We deal with the issue of testing the specification of a regression function. As a leading case, we consider testing for a pure noise model. We study the smallest local alternatives that can be detected asymptotically in a minimax sense. We propose a simple testing procedure that has asymptotic...

The paper examines the redistributive consequences of the economic integration of factor markets. We consider two countries that redistribute income among their residents. The social benefits in each country are financed by a source based tax on capital which is democratically chosen by its...

We study the relationship between ambiguity (which comes into the picture since contracts have to be written in natural language), and contractual incompleteness. The contracting process is modelled as a signalling game between the parties and the judge, with the contract as the signal. The...