We provide a microfounded account of imperfect information in the stochastic growth model which dramatically changes the properties of the model. We describe heterogenous households that acquire information about aggregates through their participation in markets. If markets are incomplete,...

Optimal monetary stabilisation in the standard New Keynesian framework usually assumes a policy loss function from outside the model. In this paper, in contrast, the objective arises directly from the model. Credit constraints and sticky nominal debt contracts imply that monetary stabilisation...

M. C. Jensen (1978) describes a market as efficient if it is impossible to make economic profits by trading on the basis of available information. On this criterion, the bond markets of the United States, the United Kingdom, and Germany are all inefficient. Trading rules that switch between...

This paper investigates the use of alternative measures of dividend yields to predict US aggregate stock returns. Following <link rid="b30">Miller and Modigliani</link> ["Journal of Business" (1961), Vol. 34, pp. 411-433] we construct a cashflow yield that includes both dividend and non-dividend cashflows to...

A range of monthly series are currently available giving indications of short-term movements in output in the UK. The main aim of this paper is to suggest a formal and coherent procedure for grossing these monthly data up to represent the whole of GDP. Although the resultant estimates of GDP...

Empirical evidence presented in this paper shows that the predictability of inflation at long horizons varies considerably across countries. Both simple theory and empirical evidence suggest that the crucial factor is the extent to which systematic monetary policy succeeds in stabilising the...

If stock prices followed a random walk, uncertainty about future stock prices would be so great that the observed bias towards equities in long-term investment portfolios would be surprising. The good news is that if, as a growing body of research suggests, there is even a weak tendency for...

There is a near-consensus that central bankers should focus their attention on the control of inflation, and should accordingly not pay attention to movements in stock markets. This view is reinforced by the continuing influence of the Efficient Markets Hypothesis (EMH), which maintains that...