This paper extends the forestry maximum principle of Heaps (1984) to allow the benefits of harvesting to be the utility of the volume of wood harvested as in Mitra - Wan (1985, 1986). Unlike those authors, however, time is treated as a continuous rather than as a discrete variable. Existence of...

This paper develops a dynamic asset pricing model with persistent heterogeneous beliefs. The model features competitive traders who receive idiosyncratic signals about an underlying fundamentals process. We adapt Futia’s (1981) frequency domain methods to derive conditions on the fundamentals...

This paper explores the importance of accessible and focal information in influencing beliefs and attention in a learning-to-forecast laboratory experiment where subjects are incentivized to form accurate expectations about inflation and the output gap. We consider the effects of salient and...

Rules are thought to persist to the extent that the direct benefits of having them (e.g. reduced transactions costs) exceed the costs of enforcement and of occasional misapplications. We argue that a second crucial role of rules is as screening mechanisms for identifying cooperative types. Thus...

We consider models defined by a set of moment restrictions that may be subject to weak identification. More specifically, we study the asymptotic properties of the standard GMM estimator and the Hansen J-test when additional moment restrictions that are weaker than the original ones are...

The effectiveness of monetary policy depends, to a large extent, on market expectations of its future actions. In a standard New Keynesian business cycle model with rational expectations, systematic monetary policy reduces the variance of inflation and output gap by at least two-thirds. These...

Currently, we have only a limited understanding of how central bank purchases of illiquid assets (“quantitative easing”) affect long-term interest rates, borrowing costs, and the real economy. Since the historical record of quantitative easing is sparse, theoretical work is needed to guide...

Calibration results in Rabin (2000) and Safra and Segal (2008; 2009) suggest that both expected and non-expected utility theories cannot produce non-negligible risk aversion over small stakes without producing implausible risk aversion over large stakes. This paper provides calibration results for...

How does the allocation of scarce jobs and production influence their supply? We present the results of a macroeconomics laboratory experiment that investigates the effects of alternative rationing schemes on economic stability. Participants play the role of consumer-workers who interact in...

Can monetary or fiscal policy stabilize expectations in a liquidity trap? We study expectation formation near the zero lower bound using a learning-to-forecast laboratory experiment. Monetary policy targets inflation around a constant or state-dependent target. Subjects’ expectations...