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I argue that equipment price deflation might be overstated because the methods used to measure it rely on the erroneous assumption of perfectly competitive markets. The main intuition behind this argument is that what these price indices might actually capture not a price decrease but the...
Persistent link: https://www.econbiz.de/10010283342
This paper uses Hansen and Jagannathan's (1991) volatility bounds to evaluate models with idiosyncratic consumption risk. I show that idiosyncratic risk does not change the volatility bounds at all when consumers have CRRA preferences and the distribution of the idiosyncratic shock is...
Persistent link: https://www.econbiz.de/10010283344
sign and the magnitude of the quality bias in the most commonly applied price index methods are determined by the cross … (constant elasticity of substitution) preferences. I illustrate the bias in the commonly applied price index methods by …
Persistent link: https://www.econbiz.de/10010283346
This paper analyzes the impact of exchange rate fluctuations when they are only partially passed through to consumer prices. We show that an exchange rate depreciation does not necessarily have a beggar-thy-neighbor effect and may in fact have an opposite, or beggar-thyself, effect. The...
Persistent link: https://www.econbiz.de/10010283356
This paper provides a microstructural explanation for the success of two familiar predictions from technical analysis: 1) trends tend to be reversed at predictable support and resistance levels, and 2) trends gain momentum once predictable support and resistance levels are crossed. ; The...
Persistent link: https://www.econbiz.de/10010283357
This paper studies an overlapping generations economy with capital where limited communication and stochastic relocation create an endogenous transactions role for fiat money. We assume a production function with a knowledge externality (Romer-style) that nests economies with endogenous growth...
Persistent link: https://www.econbiz.de/10010283359
Self-fulfilling expectations are commonly believed to play an important role in the transmission of currency crises across countries. However, existing models that use multiple equilibria to illustrate the importance of such expectations have many undesirable features. This paper presents a new...
Persistent link: https://www.econbiz.de/10010283360
When risk-factor loadings are time-varying and unobservable, investors are forced to form beliefs about the levels of their loadings. The learning process involved in forming these beliefs has normative implications for asset-pricing tests. This paper develops an equilibrium model of learning...
Persistent link: https://www.econbiz.de/10010283362
Lack of commitment in monetary policy leads to the well known Barro-Gordon inflation bias. In this paper, we argue that two phenomena associated with the time inconsistency problem have been overlooked in the exchange rate debate. We show that, absent commitment, independent monetary policy can...
Persistent link: https://www.econbiz.de/10010283377
Border prices of traded goods are highly sensitive to exchange rates; however, the consumer price index (CPI) and the …
Persistent link: https://www.econbiz.de/10010283380