We investigate identifiability issues in DSGE models and their consequences for parameter estimation and model evaluation when the objective function measures the distance between estimated and model impulse responses. We show that observational equivalence, partial and weak identification...

This paper studies how a central bank’s preference for robustness against model misspecification affects the design of monetary policy in a New-Keynesian model of a small open economy. Due to the simple model structure, we are able to solve analytically for the optimal robust policy rule, and...

We use an interactive epistemology framework to provide a systematic analysis of some solu- tion concepts for games with asymmetric information. We characterize solution concepts using expressible epistemic assumptions, represented as events in the canonical space generated by primitive...

Employees of "globalized" firms face a riskier, but potentially more rewarding, menu of labor market outcomes. We document this neglected trade-off of globalization for a sample of Indian manufacturing firms. On the one hand, the employees of firms subject to foreign competition face a more...

This paper addresses the issue of forecasting the term structure. We provide a unified state-space modelling framework that encompasses different existing discrete-time yield curve models. within such framework we analyze the impact on forecasting performance of two crucial modelling choices,...

We construct and numerically solve a dynamic Hechscher-Ohlin model which, depending on the distribution of production factors in the world and parameter values, allows for worldwide factor price equalization or complete specialization. We explore the dynamics of the model under different...

We compare single round vs runoff elections under plurality rule, allowing for partly endogenous party formation. Under runoff elections, the number of political candidates is larger, but the influence of extremist voters on equilibrium policy and hence policy volatility are smaller, because the...

We study how public policy can contribute to increase the share of early stage and high-tech venture capital investments, thus helping the development of active venture capital markets. A simple extension of the seminal model by Holmstrom and Tirole (1997) provides a theoretical base for our...

This paper analyses the sources of buyer power and its effect on sellers' investment. We show that a retailer extracts a larger surplus from the negotiation with an upstream manufacturer the more it is essential to the creation of total surplus. In turn, this depends on the rivalry between...

I study the coexistence of formal and informal finance in underdeveloped credit markets. Formal banks have access to unlimited funds but are unable to control the use of credit. Informal lenders can prevent non-diligent behavior but often lack the needed capital. The model implies that formal...