In this paper we derive a method for simultaneously estimating three possible determinants of output price : the marginal market cost of production, the user cost of the resource, and the exercise of market power.

Employing the neutral Kindleberger definition of a bubble as "an upward price movement over an extended range that then implodes", this paper explores the causes of the "Japanese Bubble" of 1985 to 1990 without precluding the possibility that the bubble was due to perceptions of fundamentals....

Standard exchange rate models perform poorly in out-of-sample forecasting when compared to the random walk model. We posit that part of the poor performance of these models may be due to their omission of political factors.

This Paper reinterprets standard axioms in choice theory to introduce the concepts of ‘belief dependent’ utility functions and aversion to ‘state-uncertainty’. It shows that this type of preference helps to explain the various stylized facts of asset returns, including a high equity risk...

Recent research in empirical finance has documented that expected excess returns on bonds and stocks, real interest rates, and risk shift over time in predictable ways. Furthermore, these shifts tend to persist over long periods of time. In this paper we propose an empirical model that is able...

This paper examines the optimal consumption and portfolio choice problem of long-horizon investors who have access to a riskless asset with constant return and a risky asset (‘stocks’) with constant expected return and time varying precision – the reciprocal of volatility. Markets are...

A simple test of inflation target credibility is constructed by subtracting the maximum and minimum inflation rates consistent with the inflation targets from the yields to maturity on nominal bonds. This results in a target-consistent range of real yields on nominal bonds. If expected real...