Stylized facts about statistical properties for short horizon returns in financial markets have been identified in the literature, but a common cause for their manifestation has yet to be found. We show that a simple asset pricing model with representative agent and rational expectations is able...

This paper examines the behaviour of the finance premium following technology and monetary shocks in a Dynamic Stochastic General Equilibrium (DSGE) model where borrowers use a fraction of their production (output) as collateral. We show that this simple framework is capable of producing a...

The paper presents a simple dynamic macroeconomic model of a bank-dominated financial system that captures some of the key credit market imperfections commonly found in middle-income countries. The model is used to analyse the interactions between monetary and macroprudential policies,...

In this paper we investigate the possibility of sunspot equilibria to emerge from a process of learning and adaptation on agents' beliefs. To such end, we consider both …finite state Markov sunspots and sunspots in autoregressive form and derive conditions for the existence of an heterogeneous...

There is compelling evidence that many macroeconomic and financial variables are not generated by linear models. This evidence is based on testing linearity against either smooth nonlinearity or piece-wise linearity, but there is no framework that encompasses both. This paper provides an...

This paper provides an explanation for recent empirical evidence on the heterogeneous effects of human capital on economic growth in developing countries. In a two-period overlapping generations economy with physical and capital accumulation, state-appointed bureaucrats are responsible for...

This paper analyzes the dynamics of public debt in a simple two-period overlapping generations model of endogenous growth with productive public goods. Alternative fiscal rules are defined, with particular attention devoted to the golden rule. Conditions under which multiple equilibria may...

This paper argues that excessive financial development in combination with high levels of technological innovation or R&D activities may lead to the former being ineffective in generating economic growth. This hypothesis is examined through a dynamic panel analysis using two measures of...

We present an overlapping generations model in which aspirationalagents face uncertainty about the returns to human capital. Investment in human capital requires external funding, implying a probability of bankruptcy that is greater the lower the human capital endowment of an agent. We show that...

We provide a critical review on the methods previously adopted into the literature of learning and expectations in macroeconomics in order to initialize its underlying learning algorithms either for simulation or empirical purposes. We find that none of these methods is able to pass the sieve of...