We initially examine two different methods for learning about parameters in a Rational Expectations setting, and show that there are conflicting E-stability results. We show that this conflict also extends to Minimum State Variable (MSV) representations. One of these methods of learning lends...

This paper analyses the welfare performance of a set of five alternative interest rate rules in an open economy stochastic dynamic general equilibrium model with nominal rigidities. A rule with a lagged interest rate term, high feedback on inflation and low feedback on output is found to yield...

A common feature of exchange rate misalignments is that they produce a divergence between traded and non-traded goods sectors, which appears to pose a dilemma for policy makers. In this paper we develop a small open economy model which features traded and non-traded goods sectors with which to...

The efect of taxation on growth is embodied in a model of a small open economy with endogenous growth. The structural model is estimated on post-war panel data for 76 countries and the bootstrap is used to produce the model’s sampling variation. Panel data regressions of growth on taxation do...

We examine the impact of different degrees of fiscal feedback on debt in an economy with nominal rigidities where monetary policy is optimal. We look at the extent to which different degrees of fiscal feedback enhances or detracts from the ability of the monetary authorities to stabilise output...

Using a two period model with moral hazard and uninsured risk, we argue that the decline in equity premium from its historically high level is due to a gradual elimination of barriers to universal banking. The loan contracts set up by financial intermediaries became more complete in nature with...

We propose an index of the fiscal stance that is convenient for practical use. It is based on a finite time horizon, not on an infinite time horizon like most tests. As it employs VAR analysis it is simple to compute and easily automated. We also show how it is possible to analyse a change of...

This paper is a quantitatively-oriented theoretical study into the interaction between housing prices, aggregate production, and household behaviour over a lifetime. We develop a life-cycle model of a production economy in which land and capital are used to build residential and commercial...

This paper derives a New Keynesian dynamic general equilibrium model with liquidity constrained consumers and sticky prices. The model allows a role for both government spending and taxation in the DGE model. The model is then estimated using US data. We demonstrate that there seems to be a...