2017-05-23T20:41:04Z
http://oai.repec.org/oai.php
oai:RePEc:eee:dyncon:v:55:y:2015:i:c:p:148-1752015-06-18RePEc:eee:dyncon
article
Implications of productive government spending for fiscal policy
The standard assumption in macroeconomics that government spending is unproductive can have substantive implications for tax and spending policy. Productive government spending introduces a positive feedback between the tax rate, the productive capacity of the economy, and tax revenue. We allow marginal tax revenue to be optimally allocated between productive subsidies to human capital and utility-enhancing government consumption and calculate Laffer Curves for the US. Productive government spending yields higher revenue-maximizing tax rates, steeper slopes at low tax rates and higher peaks. The differences are particularly pronounced for the labor-tax Laffer curve. The use of tax revenue is an important determinant of the actual revenue that a tax rate increase generates.
Fiscal policy; Laffer curve; Welfare; Human capital;
C
2015
55
148
175
E62
H20
H52
http://www.sciencedirect.com/science/article/pii/S0165188915000706
Daniel, Betty C.
Gao, Si
oai:RePEc:eee:dyncon:v:55:y:2015:i:c:p:89-1122015-06-18RePEc:eee:dyncon
article
Equilibrium transitions from non-renewable energy to renewable energy under capacity constraints
We study the transition between non-renewable and renewable energy sources with adjustment costs over the production capacity of renewable energy. Assuming constant variable marginal costs for both energy sources, convex adjustment costs and a more expensive renewable energy, we show the following. With sufficiently abundant non-renewable energy endowments, the dynamic equilibrium path is composed of a first time phase of only non-renewable energy use followed by a transition phase substituting progressively renewable energy to non-renewable energy before a last time phase of only renewable energy use. The investment into renewable energy may either begin before actual production of renewable energy or be delayed until the energy price achieves a sufficient gap with respect to the renewable energy cost. With an initially abundant non-renewable resource, the features of the transition between non-renewable and renewable energy do not depend upon the initial resource stock.
Energy transition; Non-renewable resource; Renewable energy; Adjustment costs; Capacity constraints;
C
2015
55
89
112
D92
Q30
Q40
Q42
http://www.sciencedirect.com/science/article/pii/S0165188915000585
Amigues, Jean-Pierre
Kama, Alain Ayong Le
Moreaux, Michel
oai:RePEc:eee:dyncon:v:56:y:2015:i:c:p:1-192015-06-18RePEc:eee:dyncon
article
Costly arbitrage through pairs trading
We study the optimal trading policy of an arbitrageur who can exploit temporary mispricing in a market with two convergent assets. We build on the model of Liu and Timmermann (2013) and include transaction costs, which impose additional limits to the implementation of such convergence trade strategy. We show that the presence of transaction costs could reveal an endogenous stop-loss concern in a certain economy, which affects the optimal policy of the arbitrageur in significant ways. Using pairs of dual-listed Chinese stock shares as samples and a pairs trading strategy based on standard deviation of the spread as benchmark, we demonstrate the efficiency of the strategy implied by our model. Several extensions of our model are also discussed.
Pairs trading; Risky arbitrage; Delta-neutral strategies; Transaction costs;
C
2015
56
1
19
C32
G11
G12
http://www.sciencedirect.com/science/article/pii/S016518891500072X
Lei, Yaoting
Xu, Jing
oai:RePEc:eee:dyncon:v:56:y:2015:i:c:p:34-542015-06-18RePEc:eee:dyncon
article
Identification of DSGE models—The effect of higher-order approximation and pruning
This paper shows how to check rank criteria for a local identification of nonlinear DSGE models, given higher-order approximations and pruning. This approach imposes additional restrictions on (higher-order) moments and polyspectra, which can be used to identify parameters that are unidentified in a first-order approximation. The identification procedures are demonstrated by means of the Kim (2003) and the An and Schorfheide (2007) models. Both models are identifiable with a second-order approximation. Furthermore, analytical derivatives of unconditional moments, cumulants and corresponding polyspectra up to fourth order are derived for the pruned state-space.
Identification; Pruning; Higher-order moments; Cumulants; Polyspectra; Analytical derivatives;
C
2015
56
34
54
C10
C51
C52
E1
http://www.sciencedirect.com/science/article/pii/S0165188915000731
Mutschler, Willi
oai:RePEc:eee:dyncon:v:56:y:2015:i:c:p:55-812015-06-18RePEc:eee:dyncon
article
Hiring, firing, and relocation under employment protection
We analyze how hiring and firing costs as well as firing regulatory delays affect firms’ hiring, firing, and relocation policy with a stochastic control model. These frictions are substantial; e.g. the firing delay can be almost a year. In the model hiring and firing costs depend on the firm size and the number of people hired or fired. Based on our simulations, hiring and firing elasticities without relocation are highest with respect to demand and productivity volatility and the hiring and firing variable costs. The elasticity of firing due to relocation is highest with respect to the firm-sized firing cost.
Labor market frictions; Job reallocation; Stochastic control;
C
2015
56
55
81
D21
J23
J63
J68
L51
http://www.sciencedirect.com/science/article/pii/S0165188915000718
Dai, Min
Keppo, Jussi
Maull, Tim
oai:RePEc:eee:dyncon:v:56:y:2015:i:c:p:20-332015-06-18RePEc:eee:dyncon
article
Optimal inflation rates with the trending relative price of investment
I study the effect of the trending relative price of investment on the optimal target rate of inflation in an estimated dynamic general equilibrium model of the U.S. economy. The price of investment has a decreasing trend relative to that of consumption because of investment-specific technological progress. If the prices of investment goods are sticky, a benevolent planner puts weight on stabilizing these prices, which works to raise the optimal target rate of inflation in terms of the price of consumption. The estimated model shows a high degree of price stickiness in an investment sector and the resulting optimal target rate of inflation is significantly positive. This result is robust to an extended model in which the prices of some categories of investment goods are flexible.
Optimal inflation rates; Trend inflation; Sticky prices; Bayesian estimation;
C
2015
56
20
33
E52
E61
http://www.sciencedirect.com/science/article/pii/S016518891500069X
Ikeda, Daisuke
oai:RePEc:eee:dyncon:v:55:y:2015:i:c:p:130-1472015-06-18RePEc:eee:dyncon
article
Shifts in volatility driven by large stock market shocks
This paper presents an extension of the stochastic volatility model which allows for level shifts in volatility of stock market returns, known as structural breaks. These shifts are endogenously driven by large return shocks (innovations), reflecting large pieces of market news. These shocks are identified from the data as being bigger in absolute terms than the values of two threshold parameters of the model: one for the negative shocks and one for the positive shocks. The model can be employed to investigate different sources of stock market volatility shifts driven by market news, without relying on exogenous information. In addition to this, it has a number of interesting features which enable us to study the effects of large return shocks on future levels of market volatility. The above properties of the model are shown based on a study for the US stock market volatility.
Stochastic volatility; Structural breaks;
C
2015
55
130
147
C22
C15
http://www.sciencedirect.com/science/article/pii/S0165188915000548
Dendramis, Yiannis
Kapetanios, George
Tzavalis, Elias
oai:RePEc:eee:dyncon:v:55:y:2015:i:c:p:57-702015-06-18RePEc:eee:dyncon
article
Approximate dynamic programming with post-decision states as a solution method for dynamic economic models
I introduce and evaluate a new stochastic simulation method for dynamic economic models. It is based on recent work in the operations research and engineering literatures (Van Roy et al., 1997; Powell, 2007; Bertsekas, 2011), but also had an early application in economics (Wright and Williams, 1982, 1984). The baseline method involves rewriting the household׳s dynamic program in terms of post-decision states. This makes it possible to choose controls optimally without computing an expectation. I add a subroutine to the original algorithm that updates the values of states not visited frequently on the simulation path; and adopt a stochastic stepsize that efficiently weights information. Finally, I modify the algorithm to exploit GPU computing.
Numerical solutions; Approximations; Heterogeneous agents; Nonlinear numerical solutions; Dynamic programming;
C
2015
55
57
70
C60
C61
C63
D52
http://www.sciencedirect.com/science/article/pii/S0165188915000561
Hull, Isaiah
oai:RePEc:eee:dyncon:v:55:y:2015:i:c:p:1-132015-06-18RePEc:eee:dyncon
article
Super-exponential growth expectations and the global financial crisis
We construct risk-neutral return probability distributions from S&P 500 options data over the decade 2003–2013, separable into pre-crisis, crisis and post-crisis regimes. The pre-crisis period is characterized by increasing realized and, especially, option-implied returns. This translates into transient unsustainable price growth that may be identified as a bubble. Granger tests detect causality running from option-implied returns to Treasury Bill yields in the pre-crisis regime with a lag of a few days, and the other way round during the post-crisis regime with much longer lags (50–200days). This suggests a transition from an abnormal regime preceding the crisis to a “new normal” post-crisis. The difference between realized and option-implied returns remains roughly constant prior to the crisis but diverges in the post-crisis phase, which may be interpreted as an increase of the representative investor׳s risk aversion.
Financial crisis; Returns; Expectations; Options; Risk-neutral densities;
C
2015
55
1
13
D84
G01
G14
http://www.sciencedirect.com/science/article/pii/S0165188915000536
Leiss, Matthias
Nax, Heinrich H.
Sornette, Didier
oai:RePEc:eee:dyncon:v:55:y:2015:i:c:p:71-882015-06-18RePEc:eee:dyncon
article
Firm dynamics and the origins of aggregate fluctuations
What drives aggregate fluctuations? I test the granular hypothesis — according to which the largest firms in the economy drive aggregate dynamics — by estimating a dynamic factor model with firm-level data. The growth rate of a firm׳s sales is decomposed in an unobserved common macroeconomic component and in a residual that I interpret as an idiosyncratic firm-level component. The empirical results show that, after properly controlling for aggregate shocks, idiosyncratic shocks have little role in explaining U.S. business cycle fluctuations.
Business cycles; Firm dynamics; Granular residual; Dynamic factor models;
C
2015
55
71
88
E32
D20
C30
http://www.sciencedirect.com/science/article/pii/S0165188915000573
Stella, Andrea
oai:RePEc:eee:dyncon:v:55:y:2015:i:c:p:14-382015-06-18RePEc:eee:dyncon
article
The zero lower bound, the dual mandate, and unconventional dynamics
This paper examines monetary policy when it is constrained by the zero lower bound (ZLB) on the nominal interest rate. Our analysis uses a nonlinear New Keynesian model with technology and discount factor shocks. Specifically, we investigate why technology shocks may have unconventional effects at the ZLB, what factors affect the likelihood of hitting the ZLB, and the implications of alternative monetary policy rules. We initially focus on a New Keynesian model without capital (Model 1) and then study that model with capital (Model 2). The advantage of including capital is that it introduces another mechanism for intertemporal substitution that strengthens the expectational effects of the ZLB. Four main findings emerge: (1) In Model 1, the choice of output target in the Taylor rule may reverse the effects of technology shocks when the ZLB binds; (2) When the central bank targets steady-state output in Model 2, a positive technology shock at the ZLB leads to more pronounced unconventional dynamics than in Model 1; (3) The presence of capital changes the qualitative effects of demand shocks and alters the impact of a monetary policy rule that emphasizes output stability; and (4) In Model 1, the constrained linear solution is a decent approximation of the nonlinear solution, but meaningful differences exist between the solutions in Model 2.
Monetary policy; Zero lower bound; Nonlinear solution method; Capital;
C
2015
55
14
38
E31
E42
E58
E61
http://www.sciencedirect.com/science/article/pii/S016518891500055X
Gavin, William T.
Keen, Benjamin D.
Richter, Alexander W.
Throckmorton, Nathaniel A.
oai:RePEc:eee:dyncon:v:55:y:2015:i:c:p:39-562015-06-18RePEc:eee:dyncon
article
Cohort and target age effects on subjective survival probabilities: Implications for models of the retirement phase
Subjective survival scaling factors are often estimated from one observation of life expectancy and treated as constant to any target age. Using new survey data on subjective survival probabilities, we estimate a model incorporating cohort- and target age-varying beliefs in scaling factors. Both cohort age and target age matter: respondents are pessimistic about overall life expectancy but optimistic about survival at advanced ages, and older respondents are more optimistic than younger. We propose a new theoretical model incorporating cohort- and target age-varying beliefs and illustrate their effects on the perceived value of annuities and on retirement phase consumption plans.
Subjective life expectancy; Unobservable heterogeneity; Rational expectations; Life cycle model;
C
2015
55
39
56
D14
D84
J11
I10
http://www.sciencedirect.com/science/article/pii/S0165188915000512
Wu, Shang
Stevens, Ralph
Thorp, Susan
oai:RePEc:eee:dyncon:v:55:y:2015:i:c:p:113-1292015-06-18RePEc:eee:dyncon
article
How well does the weighted price contribution measure price discovery?
The weighted price contribution (WPC) is a popular measure for price discovery. This paper examines the theoretical properties and empirical performance of the WPC in sequential markets. The benchmark used to judge the WPC is the information share (IS) measure based on the variation of the efficient price. We derive the asymptotic value of the WPC, which is a complex combination of the unconditional means and variances of the returns of sequential markets, under the assumption of normality. We show that the WPC correctly converges to the IS only when the returns are uncorrelated with zero means. Our theoretical predictions based on normality hold well in simulations and in empirical analyses of the overnight price discovery for the S&P 100 index and its constituent stocks. As the correlation between overnight and daytime returns increases, the WPC deviates from the IS substantially.
Price discovery; Weighted price contribution; Information share; Information flow; Efficient price; Overnight return;
C
2015
55
113
129
G14
G15
C32
http://www.sciencedirect.com/science/article/pii/S0165188915000676
Wang, Jianxin
Yang, Minxian
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:205-2262015-08-05RePEc:eee:dyncon
article
Multipliers of unexpected increases in defense spending: An empirical investigation
We show that unexpected increases in defense spending increase total factor productivity (TFP) and output and decrease investment in US quarterly data. Yet, the output multiplier is zero when the TFP response is shut down. We examine various explanations for this phenomenon and find that the rise in TFP is due to the presence of measurement error in quarterly data. Using artificial data generated from an RBC model with measurement error, we demonstrate the suitability of our identification approach for recovering the true output multiplier in the presence of measurement error.
Defense spending; Unanticipated defense shocks; Total factor productivity;
C
2015
57
205
226
E32
E62
http://www.sciencedirect.com/science/article/pii/S016518891500113X
Ben Zeev, Nadav
Pappa, Evi
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:1-232015-08-05RePEc:eee:dyncon
article
The implications of a graying Japan for government policy
Japan is in the midst of a demographic transition that is both rapid and large by international standards. As recently as 1990 Japan had the youngest population among the Group of 6 large, developed countries. However, the combined effects of aging of the baby-boomer generation and low fertility rates have produced very rapid aging. Japan now finds itself with the oldest population among the Group of 6 and its population will continue to age at a rapid pace in future years. Aging is already placing a burden on government finances and Japan׳s ability to confront the negative fiscal implications of future aging is constrained by its very high debt–GDP ratio. We find that Japan faces a severe fiscal crisis if remedial action is not undertaken soon and analyze alternative strategies for correcting Japan׳s fiscal imbalances.
Fiscal policy; Demographics; Aging; Japan;
C
2015
57
1
23
E62
H51
H55
H63
http://www.sciencedirect.com/science/article/pii/S0165188915000780
Braun, R. Anton
Joines, Douglas H.
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:227-2492015-08-05RePEc:eee:dyncon
article
Riskiness, endogenous productivity dispersion and business cycles
In the data, cross-sectional productivity dispersion is countercyclical at both the plant level and the firm level, see e.g. Bloom (2009). I incorporate a firm׳s choice of risk level into a model of firm dynamics with real business cycle features to explain this empirical finding both qualitatively and quantitatively. In the model, in every period, each firm chooses the investment amount and the risk level associated with a production project every period. All projects available to each firm have the same expected flow return, determined by the aggregate and idiosyncratic shocks to the firm׳s productivity, and differ from one another only in their risk. The endogenous option of exiting the market and the limited funding for new investment jointly play an important role in motivating firms׳ risk-taking behavior. The model predicts that, in each period, relatively small firms are more likely to take risk and hence exhibit a higher exit rate, and that the cross-sectional productivity dispersion, measured as the standard deviation of the realized individual component of productivity, is larger in recessions.
Countercyclical productivity dispersion; Business cycles; Firm dynamics;
C
2015
57
227
249
E32
L11
L25
http://www.sciencedirect.com/science/article/pii/S0165188915000950
Tian, Can
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:65-762015-08-05RePEc:eee:dyncon
article
Vertical governance change and product differentiation under decreasing component costs
In deciding on whether and when to outsource component production, firms should consider the trade-off between total production costs and the ability to horizontally differentiate products. We study the outsourcing decision in a duopoly under decreasing but uncertain market rates for components, given that outsourcing increases the substitutability of the final products. We find that there is at least one firm that eventually outsources component production because it cannot differentiate its product enough by in-house production to justify the (eventually) higher costs. The follower outsources at a lower market rate or may even remain vertically integrated. The follower thus incurs the (eventually) much higher in-house component costs longer, while the low substitutability is enjoyed by both firms. Under endogenous roles, firms thus engage in a preemption game to be the first to outsource. We also find that firms generally outsource at lower market rates if uncertainty is higher, but seek to preempt at remarkably higher market rates if substitutability remains low.
C
2015
57
65
76
C73
D23
D81
L14
http://www.sciencedirect.com/science/article/pii/S0165188915000901
Vermeulen, B.
Huisman, K.J.M.
Kok, A.G. de
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:182-2042015-08-05RePEc:eee:dyncon
article
Nonlinear adventures at the zero lower bound
In this paper, we argue for the importance of explicitly considering nonlinearities in analyzing the behavior of the New Keynesian model with a zero lower bound (ZLB) of the nominal interest rate. To show this, we report how the decision rules and the equilibrium dynamics of the model are substantially affected by the nonlinear features brought about by the ZLB. We also illustrate a tension between the length of a spell at the ZLB and the drop in consumption there.
Zero lower bound; New Keynesian models; Nonlinear solution methods;
C
2015
57
182
204
E30
E50
E60
http://www.sciencedirect.com/science/article/pii/S0165188915000949
Fernández-Villaverde, Jesús
Gordon, Grey
Guerrón-Quintana, Pablo
Rubio-Ramírez, Juan F.
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:145-1622015-08-05RePEc:eee:dyncon
article
The impact of reduced pre-trade transparency regimes on market quality
This paper studies the effects of pre-trade quote transparency on spread, price discovery and liquidity in an artificial limit order market with heterogeneous trading rules. Our agent-based numerical experiments suggest that full quote transparency incurs substantial transaction costs to traders and dampens trading activity in an order-driven market. Our finding reveals that exogenous restriction of displayed depth, up to several best quotes, does not benefit market performance. On the contrary, endogenous restriction of displayed quote depth, by means of iceberg orders, improves market quality in multiple dimensions: it reduces average transaction costs, maintains higher liquidity and moderate volatility, balances the limit order book, and enhances price discovery.
Agent based models; Market transparency; Iceberg orders; Liquidity; Bid-ask spread;
C
2015
57
145
162
D4
D8
G1
http://www.sciencedirect.com/science/article/pii/S0165188915000913
Kovaleva, Polina
Iori, Giulia
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:132-1442015-08-05RePEc:eee:dyncon
article
Measuring the welfare costs of inflation in a life-cycle model
In a neoclassical growth model with life-cycle households in which money is held to satisfy a cash-in-advance constraint, the optimal steady state inflation rate is absurdly high: in excess of 20%. Lump-sum, age-independent money injections twist and flatten the lifetime profile of utility, making this profile look more like the one that would be chosen by a planner. The cost of monetary finance of lump-sum payments is the distortion introduced to the labor-leisure choice.
Monetary policy; Inflation; Welfare costs; Life-cycle model;
C
2015
57
132
144
E52
E31
E32
D58
D91
http://www.sciencedirect.com/science/article/pii/S0165188915001098
Gomme, Paul
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:112-1302015-08-05RePEc:eee:dyncon
article
Borrowing constraints, collateral fluctuations, and the labor market
This paper studies the effects of changes in collateral requirements on the cyclical properties of unemployment and job creation. I develop a general equilibrium model in which labor market frictions prevent the costless adjustment of employment. Financial frictions arise from an imperfect enforcement contract. An environment in which borrowing limits are linked to the firm׳s physical capital stock can quantitatively account for the sluggish response of labor market variables to productivity shocks. I find that fluctuations in those variables are mainly driven by changes in financial conditions. The model can explain 75% of the variation in job creation observed in the data, and it can also account for the persistent reduction in both output and leverage that follows a contraction in credit availability.
Financial frictions; Unemployment; Labor markets; Search and matching; Financial shocks;
C
2015
57
112
130
E24
E27
E32
E44
J63
J64
http://www.sciencedirect.com/science/article/pii/S016518891500086X
Garín, Julio
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:163-1812015-08-05RePEc:eee:dyncon
article
Dynamic pricing and advertising of perishable products with inventory holding costs
We examine a special class of dynamic pricing and advertising models for the sale of perishable goods, including marginal unit costs and inventory holding costs. The time horizon is assumed to be finite and we allow several model parameters to be dependent on time. For the stochastic version of the model, we derive closed-form expressions of the value function as well as of the optimal pricing and advertising policy in feedback form. Moreover, we show that for small unit shares, the model converges to a deterministic version of the problem, whose explicit solution is characterized by an overage and an underage case. We quantify the close relationship between the open-loop solution of the deterministic model and the expected evolution of optimally controlled stochastic sales processes. For both models, we derive sensitivity results. We find that in the case of positive holding costs, on average, optimal prices increase in time and advertising rates decrease. Furthermore, we analytically verify the excellent quality of optimal feedback policies of deterministic models applied in stochastic models.
Dynamic pricing and advertising; Optimal stochastic and deterministic control; Inventory holding costs; Finite horizon; Feedback heuristics;
C
2015
57
163
181
C61
D42
M37
http://www.sciencedirect.com/science/article/pii/S0165188915000974
Schlosser, Rainer
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:54-642015-08-05RePEc:eee:dyncon
article
Structural change accounting with labor market distortions
This paper quantifies the relative importance of sectoral productivity and labor market distortions for structural change in the U.S., India, Mexico and Brazil between 1960 and 2005. I use census data to compute human capital by sector and infer labor market distortions as sectoral gaps in wage per unit of human capital. I incorporate these distortions into a model of structural change, and calibrate the model to reproduce the time paths of sectoral shares of labor and value added for each country. Counterfactuals reveal that (1) TFP growth in agriculture drives most of the decline in its share of labor; (2) the role of labor market distortions is limited.
Structural change; Productivity; Distortions;
C
2015
57
54
64
O11
O41
J31
http://www.sciencedirect.com/science/article/pii/S0165188915000792
Cai, Wenbiao
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:77-952015-08-05RePEc:eee:dyncon
article
On the stability of Calvo-style price-setting behavior
An increasing literature has been concerned that the dynamics of the economy keeps switching and that, in particular, it is important to allow time variation in the degree of Calvo stickiness. We investigate this with a Markov-switching Dynamic Stochastic General Equilibrium model and show that there is little gain when allowing for such time variation. As a result we recommend to use a constant Calvo stickiness parameter, even when allowing for regime shifts elsewhere.
Markov-switching; Policy-invariant; Nominal rigidities; Monetary policy; Bayesian method; DSGE models;
C
2015
57
77
95
C11
C51
E31
E32
E42
http://www.sciencedirect.com/science/article/pii/S0165188915000755
Lhuissier, Stéphane
Zabelina, Margarita
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:96-1112015-08-05RePEc:eee:dyncon
article
A New Keynesian model with staggered price and wage setting under learning
This paper provides a study of the implications for economic dynamics when the central bank sets its nominal interest rate target in response to variations in wage inflation. I provide results on the existence, uniqueness, and stability under learning of rational expectations equilibrium for alternative specifications of the manner in which monetary policy responds to economic shocks when nominal rigidities are present. Monopolistically competitive producers set prices via staggered price contracts, and households set nominal wages in the same fashion. In this setting, the conditions for determinacy and learnability of rational expectations equilibrium differ from a model where only prices are sticky. I find that when the central bank responds to wage and price inflation and to the output gap, a Taylor principle for wage and price inflation arises that is related to stability under learning dynamics. In other words, a moderate reaction of the interest rate to wage inflation helps to avoid instability under learning and indeterminacy.
Learning; Monetary policy; Nominal wage and price rigidity; Expectational stability;
C
2015
57
96
111
E52
E31
E43
E58
http://www.sciencedirect.com/science/article/pii/S0165188915000937
Best, Gabriela
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:250-2662015-08-05RePEc:eee:dyncon
article
A model for irreversible investment with construction and revenue uncertainty
This paper presents a model of investment in projects that are characterized by uncertainty over both the construction costs and revenues. Both processes are modeled as spectrally negative Lévy jump-diffusions. The optimal stopping problem that determines the value of the project is solved under fairly general assumptions. It is found that the current value of the benefit-to-cost ratio (BCR) decreases in the frequency of negative shocks to the construction process. This implies that the cost overruns that can be expected if one ignores such shocks are increasing in their frequency. Based on calibrated data, the model is applied to the proposed construction of high-speed rail in the UK and it is found that its economic case cannot currently be made and is unlikely to be met at any time in the next decade. In addition it is found that ignoring construction uncertainty leads to a substantial probability of an erroneous decision being taken.
Investment under uncertainty; Railway investment; Optimal stopping;
C
2015
57
250
266
D81
G31
http://www.sciencedirect.com/science/article/pii/S0165188915001086
Thijssen, Jacco J.J.
oai:RePEc:eee:dyncon:v:57:y:2015:i:c:p:24-532015-08-05RePEc:eee:dyncon
article
Animal spirits as an engine of boom-busts and throttle of productivity growth
The news-shock literature interprets empirical news-shock identifications as signals about future productivity. Under this view, changes in productivity cause changes in expectations. I investigate an alternative interpretation whereby changes in expectations cause changes in productivity. I present a model where firms adopt the technology of a deterministic frontier, and where self-fulfilling expectational-shocks unleash a frenzy of adoption through which firms increase productivity. Consistent with the news evidence, stock prices and aggregate activity boom, yet TFP increases with a lag. Simulations using i.i.d. expectational-shocks yield moments consistent with the data, and qualitatively capture both high-frequency boom-busts and lower-frequency fluctuations. Finally, estimating a Beaudry–Portier style VECM on the simulated model output to identify a “news shock” recovers impulse response functions largely consistent with the Beaudry and Portier (2006) results.
Expectations-driven business cycle; Technological adoption; Sunspot; Multiple equilibria; News shock; Intangible capital;
C
2015
57
24
53
C68
E00
E2
E3
O3
O4
http://www.sciencedirect.com/science/article/pii/S0165188915000743
Gunn, Christopher M.
oai:RePEc:eee:dyncon:v:37:y:2013:i:10:p:1972-19812013-07-30RePEc:eee:dyncon
article
Dynamic pairs trading using the stochastic control approach
We propose a model for analyzing dynamic pairs trading strategies using the stochastic control approach. The model is explored in an optimal portfolio setting, where the portfolio consists of a bank account and two co-integrated stocks and the objective is to maximize for a fixed time horizon, the expected terminal utility of wealth. For the exponential utility function, we reduce the problem to a linear parabolic partial differential equation which can be solved in closed form. In particular, we exhibit the optimal positions in the two stocks.
Optimal stochastic control; Pairs trading; Co-integration; Hamilton Jacobi Bellman equation; Merton problem;
10
2013
37
1972
1981
http://www.sciencedirect.com/science/article/pii/S0165188913001164
Tourin, Agnès
Yan, Raphael
oai:RePEc:eee:dyncon:v:37:y:2013:i:10:p:2062-20822013-07-30RePEc:eee:dyncon
article
Fiscal deficits and current account deficits
Recent fiscal stimulus packages depend for their effectiveness on the assumption of non-Ricardian savings behavior. We show that, under the same assumption, higher fiscal deficits can have problematic implications if they turn out to be permanent. First, if they occur in large countries they significantly raise the world real interest rate. Second, they cause a short run current account deterioration equal to around 50% of the fiscal deficit deterioration. Third, the longer run current account deterioration equals almost 75% for a large economy such as the United States, and almost 100% for a small open economy.
Non-Ricardian households; Government deficits; Government debt; Global current account imbalances;
10
2013
37
2062
2082
E62
F41
F42
H30
H63
http://www.sciencedirect.com/science/article/pii/S0165188913000948
Kumhof, Michael
Laxton, Douglas
oai:RePEc:eee:dyncon:v:37:y:2013:i:10:p:2123-21552013-07-30RePEc:eee:dyncon
article
Fiscal policy, entry and capital accumulation: Hump-shaped responses
In this paper we consider the entry and exit of firms in a Ramsey model with capital and an endogenous labour supply. At the firm level, there is a fixed cost combined with increasing marginal cost, which gives a standard U-shaped cost curve with optimal firm size. The costs of entry (exit) are quadratic in the flow of new firms. The number of firms becomes a second state variable and the entry dynamics gives rise to a richer set of dynamics than in the standard case: in particular, there is likely to be a hump shaped response of output to a fiscal shock with maximum effect after impact and before steady-state is reached. Output and capital per firm are also likely to be hump shaped.
Entry; Ramsey; Fiscal policy; Macroeconomic dynamics;
10
2013
37
2123
2155
E22
D92
E32
D92
http://www.sciencedirect.com/science/article/pii/S0165188913000602
Brito, Paulo
Dixon, Huw
oai:RePEc:eee:dyncon:v:37:y:2013:i:10:p:2104-21222013-07-30RePEc:eee:dyncon
article
The impact of monetary policy on stock market bubbles and trading behavior: Evidence from the lab
We investigate the effect of monetary policy on stock market bubbles and trading behavior in experimental asset markets. We introduce the possibility of investing in interest bearing bonds to the widely used laboratory asset market design of Smith et al. (1988). Treatment groups face a variable interest rate policy which depends on asset prices, while control groups are subjected to a constant interest rate. We observe a strong impact of our interest rate policy on liquidity in the stock market but only a small impact on bubbles. However, we find that announcing the possibility of reserve requirements significantly reduces bubbles.
Experimental economics; Investment behavior; Liquidity; Monetary policy; Asset market bubbles;
10
2013
37
2104
2122
C92
E42
E44
E52
E58
http://www.sciencedirect.com/science/article/pii/S016518891300081X
Fischbacher, Urs
Hens, Thorsten
Zeisberger, Stefan
oai:RePEc:eee:dyncon:v:37:y:2013:i:10:p:2041-20612013-07-30RePEc:eee:dyncon
article
Quality competition with motivated providers and sluggish demand
We study incentives for quality provision in markets where providers are motivated (semi-altruistic); prices are regulated and firms are funded by a combination of block grants and unit prices; competition is based on quality, and demand adjusts sluggishly. Health or education are sectors in which the mentioned features are the rule. We show that the presence of motivated providers makes dynamic competition tougher, resulting in higher steady-state levels of quality in the closed-loop solution than in the benchmark open-loop solution, if the price is sufficiently high. However, this result is reversed if the price is sufficiently low (and below unit costs). Sufficiently low prices also imply that a reduction in demand sluggishness will lead to lower steady-state quality. Prices below unit costs will nevertheless be welfare optimal if the providers are sufficiently motivated.
Quality competition; Differential games; Motivated agents;
10
2013
37
2041
2061
C73
H42
I18
I21
L13
http://www.sciencedirect.com/science/article/pii/S016518891300095X
Siciliani, Luigi
Rune Straume, Odd
Cellini, Roberto
oai:RePEc:eee:dyncon:v:37:y:2013:i:10:p:2023-20402013-07-30RePEc:eee:dyncon
article
Returns to specialization, competition, population, and growth
Using an expanding-variety endogenous growth model with purposive human capital accumulation, this paper provides an alternative explanation of why we may observe an ambiguous correlation between product market competition (PMC) and economic growth, and between population and economic growth rates. Our explanation is based on the notion of ‘returns to specialization’. Under the model's assumptions, PMC and economic growth are ambiguously correlated when returns to specialization are decreasing, whereas population growth and productivity growth are ambiguously correlated when returns to specialization are increasing. From a theoretical point of view, these results are explained by the presence or absence of an ‘increasing production-complexity’ effect associated to the use of a larger number of intermediate-input varieties in the same production process.
Semi-endogenous growth; Population growth; Human capital; R&D; Monopolistic competition; Returns to specialization;
10
2013
37
2023
2040
O41
O31
O33
J24
J10
http://www.sciencedirect.com/science/article/pii/S0165188913000985
Bucci, Alberto
oai:RePEc:eee:dyncon:v:37:y:2013:i:10:p:1947-19712013-07-30RePEc:eee:dyncon
article
Policy change and learning in the RBC model
What is the impact of surprise and anticipated policy changes when agents form expectations using adaptive learning rather than rational expectations? We examine this issue using the standard stochastic real business cycle model with lump-sum taxes. Agents combine knowledge about future policy with econometric forecasts of future wages and interest rates. Dynamics under learning can have large impact effects and a gradual hump-shaped response, and tend to be prominently characterized by oscillations not present under rational expectations. These fluctuations reflect periods of excessive optimism or pessimism, followed by subsequent corrections.
Taxation; Government spending; Expectations; Permanent policy changes;
10
2013
37
1947
1971
E62
D84
E21
E43
http://www.sciencedirect.com/science/article/pii/S0165188913001176
Mitra, Kaushik
Evans, George W.
Honkapohja, Seppo
oai:RePEc:eee:dyncon:v:37:y:2013:i:10:p:1982-19942013-07-30RePEc:eee:dyncon
article
The intrinsic comparative dynamics of locally differentiable feedback Nash equilibria of autonomous and exponentially discounted infinite horizon differential games
The comparative dynamics of locally differentiable feedback Nash equilibria are derived for the ubiquitous class of autonomous and exponentially discounted infinite horizon differential games. The resulting refutable implications are intrinsic to the said class of differential games, and thus form their basic, empirically testable, properties. Their relationship with extant results in the optimal control theory and the static game theory is discussed. Separability conditions are identified on the instantaneous payoff and transition functions under which the intrinsic comparative dynamics collapse, in form, to those in optimal control problems. Applications of the results to capital accumulation and sticky-price games are provided.
Comparative dynamics; Differential games; Feedback Nash equilibria;
10
2013
37
1982
1994
C72
C73
L13
http://www.sciencedirect.com/science/article/pii/S0165188913001140
Caputo, Michael R.
Ling, Chen
oai:RePEc:eee:dyncon:v:37:y:2013:i:10:p:1995-20092013-07-30RePEc:eee:dyncon
article
Publish or teach? Analysis of the professor's optimal career path
This paper analyzes how faculty members dynamically allocate their efforts between improving their research and teaching skills, taking into account the organizational structures and incentives implemented by academic institutions. The model builds on the assumption that organizational structures have an impact on the nature of spillover effects between teaching and research competencies. We analyze the dynamic equilibrium under unilateral and bilateral spillovers, using the no-spillover case as a benchmark. The bilateral spillover case is the most appealing as it achieves the highest overall performance; however, the nature of the equilibrium and the career paths can be quite different depending on the parameters of the problem such as the obsolescence of competencies or the strength of the spillover effect. This finding provides interesting insights on what could be the most productive configuration of a higher education institution.
Teaching; Research; Competency spillovers; Effort allocation; Faculty management;
10
2013
37
1995
2009
J22
C61
I23
M52
http://www.sciencedirect.com/science/article/pii/S0165188913001139
El Ouardighi, Fouad
Kogan, Konstantin
Vranceanu, Radu
oai:RePEc:eee:dyncon:v:33:y:2009:i:6:p:1314-13312013-05-31RePEc:eee:dyncon
article
Asset pricing with incomplete information and fat tails
We study a consumption-based asset pricing model with incomplete information and [alpha]-stable shocks. Incomplete information leads to a non-Gaussian filtering problem. Bayesian updating generates fluctuating confidence in the agents' estimate of the persistent component of the dividends' growth rate. This has the potential to generate time variation in the volatility of model-implied returns, without relying on discrete shifts in the drift rate of dividend growth rates. A test of the model using US consumption data shows that implied returns display significant volatility persistence of a magnitude comparable to that in the data.
Asset pricing Incomplete information Time-varying volatility Fat tails Stable distributions
6
2009
33
6
1314
1331
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00007-4
Bidarkota, Prasad V.
Dupoyet, Brice V.
McCulloch, J. Huston
oai:RePEc:eee:dyncon:v:33:y:2009:i:10:p:1757-17602013-05-31RePEc:eee:dyncon
article
A note on the closed-form solution to the Lucas-Uzawa model with externality
Ruiz-Tamarit [2008. The closed-form solution for a family of four-dimension nonlinear MHDS. Journal of Economic Dynamics and Control 32, 1000-1014] provides a closed-form solution to the two-sector model of endogenous growth with externalities. He assumes that the coefficient of the relative risk aversion is equal to the physical capital share, but this assumption is empirically and theoretically implausible. This note uses the result of Boucekkine and Ruiz-Tamarit [2008. Special functions for the study of economic dynamics: the case of the Lucas-Uzawa model. Journal of Mathematical Economics 44, 33-54] and derives a closed-form solution without setting the parametric assumption. The solution path is expressed in terms of the Gauss hypergeometric functions.
Endogenous growth Closed-form solution
10
2009
33
10
1757
1760
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00075-X
Hiraguchi, Ryoji
oai:RePEc:eee:dyncon:v:33:y:2009:i:9:p:1662-16812013-05-31RePEc:eee:dyncon
article
Distortionary taxes and public investment when government promises are not enforceable
We characterize the optimal financing of productive public capital and compute the welfare loss from being unable to commit to the Ramsey policy. Because this calculation ultimately relies on numerical approximations, we contrast alternative approaches. While perturbation and linear quadratic methods deliver accurate steady states, the latter can yield misleading policy implications during transitions. We find that moving from a regime with commitment to one with discretion implies only a small welfare loss. Although Markov-perfect consumption falls noticeably short of its Ramsey counterpart in steady-state, consumption under discretion is higher in the short-run which largely offsets this long-run loss.
Public investment Commitment Time consistency Discretion Ramsey Markov-perfect
9
2009
33
9
1662
1681
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00063-3
Azzimonti, Marina
Sarte, Pierre-Daniel
Soares, Jorge
oai:RePEc:eee:dyncon:v:33:y:2009:i:5:p:1123-11332013-05-31RePEc:eee:dyncon
article
Guessing with negative feedback: An experiment
We investigate experimentally a new variant of the beauty contest game (BCG) in which players' actions are strategic substitutes (a negative feedback BCG). Our results show that chosen numbers are closer to the rational expectation equilibrium than in a strategic complements environment (a positive feedback BCG). We also find that the estimated average depth of reasoning from the cognitive hierarchy model does not differ between the two environments. We show that the difference may be attributed to the fact that additional information is more valuable when players' actions are strategic substitutes rather than strategic complements, in line with other recent experimental findings.
Guessing games Negative feedback Strategic substitutes vs. strategic complements
5
2009
33
5
1123
1133
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00033-5
Sutan, Angela
Willinger, Marc
oai:RePEc:eee:dyncon:v:33:y:2009:i:5:p:1019-10222013-05-31RePEc:eee:dyncon
article
Introduction to special issue on complexity in economics and finance
5
2009
33
5
1019
1022
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00026-8
Anufriev, Mikhail
Branch, William A.
oai:RePEc:eee:dyncon:v:33:y:2009:i:5:p:1134-11582013-05-31RePEc:eee:dyncon
article
A prototype model of speculative dynamics with position-based trading
The paper extracts a prototype asset pricing model from the literature where a market maker adjusts prices in response to order imbalances and the strategies of fundamentalists and chartists are position-based, that is, the two groups are specified in terms of their desired holdings. The deterministic formulation of the model leads to a neutral delay-differential equation of the price, whose mathematical analysis is non-standard and may be of independent interest. The stability conditions are nevertheless quite analogous to the order-based Beja-Goldman model. The effects of parameter variations are also studied in a stochastic setting, where special emphasis is put on the misalignment between price and the time-varying fundamental value, the market maker's risk aversion, and the differential profits of fundamentalists and chartists.
Asset pricing Market maker risk aversion Misalignment Neutral delay-differential equation
5
2009
33
5
1134
1158
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00034-7
Franke, Reiner
oai:RePEc:eee:dyncon:v:33:y:2009:i:5:p:1036-10512013-05-31RePEc:eee:dyncon
article
A New Keynesian model with heterogeneous expectations
Within a New Keynesian model, we incorporate bounded rationality at the individual agent level, and we determine restrictions on expectations operators sufficient to imply aggregate IS and AS relations of the same functional form as those under rationality. This result provides dual implications: the strong nature of the restrictions required to achieve aggregation serve as a caution to researchers--imposing heterogeneous expectations at an aggregate level may be ill-advised; on the other hand, accepting the necessary restrictions provides for tractable analysis of expectations heterogeneity. As an example, we consider a case where a fraction of agents are rational and the remainder are adaptive, and find specifications that are determinate under rationality may possess multiple equilibria in case of expectations heterogeneity.
Heterogeneous expectations Monetary policy Adaptive learning Aggregation
5
2009
33
5
1036
1051
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00028-1
Branch, William A.
McGough, Bruce
oai:RePEc:eee:dyncon:v:33:y:2009:i:10:p:1779-17952013-05-31RePEc:eee:dyncon
article
Innovation and growth through local and global interaction
This paper investigates the research and development activity of heterogeneous and rationally bounded firms. The latter conduct this activity through in-house research and by collecting information originating in other firms' spillovers. Thus, research and development activity owes both to independent searching and to interaction diffusing information. We study the conditions under which this idiosyncratic effort yields effects that have either local, system-wise negligible impacts or cumulate to generate significant aggregate ones. In the latter case, global effects feed back upon the incentive to innovate and therefore on the strength of local interaction as well as on autonomous research efforts. It is these dynamic forces that we model. We compare cases in which significant aggregate effects do emerge with cases in which they do not and study their outcome on innovation-directed investment and on long-term growth.
Economic growth Innovation and diffusion Innovation waves
10
2009
33
10
1779
1795
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00098-0
Andergassen, Rainer
Nardini, Franco
Ricottilli, Massimo
oai:RePEc:eee:dyncon:v:33:y:2009:i:5:p:1052-10722013-05-31RePEc:eee:dyncon
article
Price stability and volatility in markets with positive and negative expectations feedback: An experimental investigation
The evolution of many economic variables is affected by expectations that economic agents have with respect to the future development of these variables. We show, by means of laboratory experiments, that market behavior depends to a large extent on whether realized market prices respond positively or negatively to average price expectations. In the case of negative expectations feedback, as in commodity markets, prices converge quickly to their equilibrium value, confirming the rational expectations hypothesis. In the case of positive expectations feedback, as is typical for speculative asset markets, large fluctuations in realized prices and persistent deviations from the benchmark fundamental price are likely. We estimate individual forecasting rules and investigate how these explain the differences in aggregate market outcomes.
Market behavior Coordination Expectations feedback Experimental economics
5
2009
33
5
1052
1072
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00029-3
Heemeijer, Peter
Hommes, Cars
Sonnemans, Joep
Tuinstra, Jan
oai:RePEc:eee:dyncon:v:33:y:2009:i:5:p:1073-10902013-05-31RePEc:eee:dyncon
article
Asset prices, traders' behavior and market design
The dynamics of a financial market with heterogeneous agents are analyzed under different market architectures. We start with a tractable behavioral model under Walrasian market clearing and simulate it under different trading protocols. The key behavioral feature of the model is the switching by agents between simple forecasting rules on the basis of a fitness measure. By analyzing the dynamics under order-driven protocols we show that the behavioral and structural assumptions of the model are closely intertwined. The high responsiveness of agents to a fitness measure causes excess volatility, but the frictions of the order-driven markets may stabilize the dynamics. We also analyze and compare allocative efficiency and time series properties under different protocols.
Asset pricing model Heterogeneous beliefs Learning Trading protocols Market architecture
5
2009
33
5
1073
1090
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00030-X
Anufriev, Mikhail
Panchenko, Valentyn
oai:RePEc:eee:dyncon:v:38:y:2014:i:c:p:209-2342014-01-10RePEc:eee:dyncon
article
Evaluating monetary policy under preferences with zero wealth effect: A Bayesian approach
Both real and monetary macro models have parallely exploited the potential for various preferences in accounting for empirical facts. This paper brings the two literatures together by estimating time non-separable preferences with habit formation in consumption that nests several commonly used preferences. In the absence of wealth effects and external habits, these preferences fail to generate observed inflation inertia and output persistence after a monetary policy shock. Furthermore, the data strongly rejects these preferences in favor of preferences with external habits. An alternative solution is to include habit adjusted intermediate wealth effect preferences which are able to simultaneously generate sluggish responses of the variables to a monetary policy shock and fit the data better.
Preferences; Wealth effect; Habit; Monetary policy; Inflation; Output;
C
2014
38
209
234
E21
E31
E32
E52
http://www.sciencedirect.com/science/article/pii/S0165188913001991
Dey, Jaya
oai:RePEc:eee:dyncon:v:38:y:2014:i:c:p:125-1412014-01-10RePEc:eee:dyncon
article
Extracting market information from equity options with exponential Lévy processes
Lévy processes have been successfully applied in the modeling of financial assets. Useful information such as implied volatility, skewness, and risk-preferences can be derived from market option prices. In this paper, we advocate using Esscher conjugate Lévy processes to estimate risk-neutral and empirical densities. More specifically, we employ the exponential Meixner and NIG processes to calculate in closed form the pricing kernel in the equity market and then study the evolution of equity market behavior between 2002 and 2010. Our empirical analysis using S&P 500 options shows that the risk preferences of equity investors were signalling an anomaly in the market well before the subprime prime mortgage crisis (August 2007) and the crisis of confidence that followed, anticipating the downfall in equity markets in 2008, but then returning to normal levels in 2009.
Risk-neutral density; Exponential Lévy processes; Pricing kernel; Relative risk-aversion coefficient;
C
2014
38
125
141
C15
C52
C54
G15
http://www.sciencedirect.com/science/article/pii/S0165188913001978
Fabozzi, Frank J.
Leccadito, Arturo
Tunaru, Radu S.
oai:RePEc:eee:dyncon:v:38:y:2014:i:c:p:72-862014-01-10RePEc:eee:dyncon
article
The evolution of free trade networks
This paper considers the evolutionary dynamics of a free trade agreement (FTA) network formation game among N countries. We first explore the static model introduced by Goyal and Joshi (2006) and precisely characterize the set of pairwise stable FTA networks. Then, we develop a dynamic model under random perturbations and identify long-run outcomes to remove prediction uncertainty inherited from static analysis. The results show that both partial free trade and global free trade will result when there are only three countries. However, when more countries are involved, only the complete FTA network emerges.
Free trade agreements; Global free trade; Network formation game; Stochastic stability analysis;
C
2014
38
72
86
C73
F15
http://www.sciencedirect.com/science/article/pii/S0165188913001929
Zhang, Jin
Cui, Zhiwei
Zu, Lei
oai:RePEc:eee:dyncon:v:38:y:2014:i:c:p:161-1832014-01-10RePEc:eee:dyncon
article
Escape dynamics: A continuous-time approximation
We extend a continuous-time approximation approach to the analysis of escape dynamics in economic models with constant gain adaptive learning. This approach is based on the application of the results of continuous-time version of large deviations theory to the linear diffusion approximation of the original discrete-time dynamics under learning. We characterize escape dynamics by analytically deriving the most probable escape point and mean escape time. The approximation is tested on the Phelps problem of a government controlling inflation while adaptively learning a misspecified Phillips curve, studied previously by Sargent (1999) and Cho et al. (2002) (henceforth, CWS), among others. We compare our results with simulations extended to very low values of the constant gain and show that, for the lowest gains, our approach approximates simulations relatively well. We express reservations regarding the applicability of any approach based on large deviations theory to characterizing escape dynamics for economically plausible values of constant gain in the model of CWS when escapes are not rare. We show that for these values of the gain it is possible to derive first passage times for learning dynamics reduced to one dimension without resort to large deviations theory. This procedure delivers mean escape time results that fit the simulations closely. We explain inapplicability of large deviations theory by insufficient averaging near the point of self-confirming equilibrium for relatively large gains which makes escapes relatively frequent, suggest the changes which might help approaches based on the theory to work better in this gain interval, and describe a simple heuristic method for determining the range of constant gain values for which large deviations theory could be applicable.
Constant gain adaptive learning; Escape dynamics; Recursive least squares; Large deviations theory;
C
2014
38
161
183
C62
C65
D83
E10
E17
http://www.sciencedirect.com/science/article/pii/S0165188913002029
Kolyuzhnov, Dmitri
Bogomolova, Anna
Slobodyan, Sergey
oai:RePEc:eee:dyncon:v:38:y:2014:i:c:p:17-362014-01-10RePEc:eee:dyncon
article
Volatility and welfare
This paper explores the relationship between volatility and welfare. Even though households prefer smooth streams of consumption and leisure, welfare can be increasing in the volatility of an exogenous driving force if factor supply is sufficiently elastic. We provide some analytical results for a model without capital, and do some quantitative exercises in a model with capital and a variety of shocks. Welfare is greater in high shock volatility regimes under plausible parameter values. Augmenting the model with features that increase the elasticity of factor supply extends the range of parameters over which higher volatility results in greater welfare.
Volatility; Welfare cost of business cycles;
C
2014
38
17
36
E32
E37
http://www.sciencedirect.com/science/article/pii/S0165188913001887
Lester, Robert
Pries, Michael
Sims, Eric
oai:RePEc:eee:dyncon:v:38:y:2014:i:c:p:1-162014-01-10RePEc:eee:dyncon
article
The (Un-) importance of Chapter 7 wealth exemption levels
This paper examines the effects of the Chapter 7 wealth exemption level on welfare, bankruptcy filings, debt, and on asset holdings. I build a heterogeneous agent life cycle model which features uninsurable income and expense shocks. Moreover, households can borrow and save simultaneously. When a borrower defaults on her debt by filing for Chapter 7 bankruptcy, she can keep her assets up to the wealth exemption level. Wealth exemption levels are important for two reasons. First, they explain the extensive and intensive margin of the credit card debt puzzle. Around thirty percent of borrowers, both in the model and in the data, who borrow at high interest rates simultaneously save at low interest rates. However, these borrowers borrow and save only relatively small amounts, a few thousand U.S. Dollars. Second, ignoring the exemption level biases results because it overstates the costs of defaulting. The welfare gains from Chapter 7 compared to the European system, where debt is not discharged, are twice as high when exemption levels are positive compared to when they are ignored. At the same time, wealth exemption levels are unimportant in the sense that they have an impact only at low exemption levels. The effects of increases in the exemption level fade out very quickly. There is no strong positive relationship between exemption levels, which vary across U.S. states, and default rates in the model. This is in contrast to the previous literature, but consistent with the data. The reason is that those borrowers who might default do not own much wealth. Therefore, only very few households are affected by increases in the exemption level.
Personal bankruptcy law; Wealth exemption level; Asset portfolios; Credit card debt puzzle;
C
2014
38
1
16
E21
D31
K35
http://www.sciencedirect.com/science/article/pii/S0165188913002030
Mankart, Jochen
oai:RePEc:eee:dyncon:v:38:y:2014:i:c:p:250-2652014-01-10RePEc:eee:dyncon
article
Myopic governments and welfare-enhancing debt limits
This paper studies welfare effects of a soft borrowing constraint on sovereign debt. The constraint is modeled as a proportional fine per unit of debt in excess of a specified reference value, resembling features of the Stability and Growth Pact. Sovereign debt is the result of myopic fiscal policy. It reduces welfare in the absence of lump-sum taxes. The paper shows that the borrowing constraint enhances welfare by reducing long run debt. In an economy calibrated to a generic OECD country, the maximum attainable welfare gain of debt consolidation, which is induced by imposing the optimally parameterized constraint, amounts to 0.5% in terms of consumption. The short run welfare costs of the constraint, which arise from restricting the use of debt to smooth taxes, are quantitatively negligible.
Myopic governments; Debt bias; Fiscal constraints; Stability and Growth Pact; Social welfare;
C
2014
38
250
265
E6
H3
http://www.sciencedirect.com/science/article/pii/S016518891300211X
Rieth, Malte
oai:RePEc:eee:dyncon:v:38:y:2014:i:c:p:235-2492014-01-10RePEc:eee:dyncon
article
Endogenous specialization of heterogeneous innovative activities of firms under the technological spillovers
This paper proposes a reduced form model of dynamic duopoly in the context of heterogeneous innovations framework. Two agents invest into expansion of variety of available products and into the improvement of quality of existing products simultaneously. Every newly introduced product has its own dimension of quality-improving innovations and there is a continuum of possible new products. In the area of quality innovations the costless imitation effect is modelled while in the area of variety expanding innovations agents are cooperating with each other. As a result the specialization of innovative activity is observed. This specialization arises from strategic interactions of agents in both fields of innovative activity and is endogenously defined from the dynamics of the model.
Innovations; Dynamics; Multiproduct; Technology spillovers; Distributed control; Differential games;
C
2014
38
235
249
C02
L0
O31
http://www.sciencedirect.com/science/article/pii/S016518891300198X
Bondarev, Anton
oai:RePEc:eee:dyncon:v:38:y:2014:i:c:p:37-642014-01-10RePEc:eee:dyncon
article
The short and long-run impact of globalization if firms differ in factor input ratios
Empirical evidence has shown that exporters are more capital intensive than non-exporters. Based on this evidence, I construct a two-factor general equilibrium model with firm heterogeneity in factor intensities, monopolistic competition, scale economies and international trade. This setting can explain several empirical regularities on international trade, factor market competition, factor relocations and factor returns: (i) exporters are more capital intensive than non-exporters, regardless of a country's relative factor endowments; (ii) finite supply of capital limits a country's export activities; (iii) trade liberalization increases the relative return to capital; (iv) new profit opportunities in export markets change the distribution of firms towards the more capital intensive ones. Finally, I extend the setting to endogenous capital accumulation and show that trade liberalization induces economic growth and, in the long-run, benefits all factors in real terms.
International trade; Economic growth; Firm heterogeneity in factor input ratios; Factor market competition; Income distribution;
C
2014
38
37
64
F12
L11
O41
D33
http://www.sciencedirect.com/science/article/pii/S0165188913001930
Emami Namini, Julian
oai:RePEc:eee:dyncon:v:38:y:2014:i:c:p:105-1242014-01-10RePEc:eee:dyncon
article
Age-dependent investing: Optimal funding and investment strategies in defined contribution pension plans when members are rational life cycle financial planners
A defined contribution pension plan allows consumption to be redistributed from the plan member's working life to retirement in a manner that is consistent with the member's personal preferences. The plan's optimal funding and investment strategies therefore depend on the desired profile of consumption over the lifetime of the member. We investigate these strategies under the assumption that the member is a rational life cycle financial planner and has an Epstein–Zin utility function, which allows a separation between risk aversion and the elasticity of intertemporal substitution. We also take into account the member's human capital during the accumulation phase of the plan and we allow the annuitisation decision to be endogenously determined during the decumulation phase.
Defined contribution pension plan; Funding strategy; Investment strategy; Epstein–Zin utility; Stochastic lifestyling; Phased annuitisation; Dynamic programming;
C
2014
38
105
124
G11
G23
http://www.sciencedirect.com/science/article/pii/S0165188913002169
Blake, David
Wright, Douglas
Zhang, Yumeng
oai:RePEc:eee:dyncon:v:38:y:2014:i:c:p:142-1602014-01-10RePEc:eee:dyncon
article
Computing equilibria in dynamic models with occasionally binding constraints
We propose a method to compute equilibria in dynamic models with several continuous state variables and occasionally binding constraints. These constraints induce non-differentiabilities in policy functions. We develop an interpolation technique that addresses this problem directly: It locates the non-differentiabilities and adds interpolation nodes there. To handle this flexible grid, it uses Delaunay interpolation, a simplicial interpolation technique. Hence, we call this method Adaptive Simplicial Interpolation (ASI). We embed ASI into a time iteration algorithm to compute recursive equilibria in an infinite horizon endowment economy where heterogeneous agents trade in a bond and a stock subject to various trading constraints. We show that this method computes equilibria accurately and outperforms other grid schemes by far.
Adaptive grid; Delaunay interpolation; Non-differentiabilities; Occasionally binding constraints; Simplicial interpolation;
C
2014
38
142
160
C63
C68
E21
G11
http://www.sciencedirect.com/science/article/pii/S0165188913001954
Brumm, Johannes
Grill, Michael
oai:RePEc:eee:dyncon:v:36:y:2012:i:1:p:26-462012-10-16RePEc:eee:dyncon
article
Learning in an estimated medium-scale DSGE model
We evaluate the empirical relevance of learning by private agents in an estimated medium-scale DSGE model. We replace the standard rational expectations assumption in the Smets and Wouters (2007) model by a constant-gain learning mechanism. If agents know the correct structure of the model and only learn about the parameters, both expectation mechanisms produce very similar results, and only the transition dynamics that are generated by specific initial beliefs seem to improve the fit. If, instead, agents use only a reduced information set in forming the perceived law of motion, the implied model dynamics change and, depending on the specification of the initial beliefs, the marginal likelihood of the model can improve significantly. These best-fitting models add additional persistence to the dynamics and this reduces the gap between the IRFs of the DSGE model and the more data-driven DSGE-VAR model. However, the learning dynamics do not systematically alter the estimated structural parameters related to the nominal and real frictions in the DSGE model.
Constant-gain adaptive learning; Medium-scale DSGE model; DSGE-VAR;
1
2012
36
26
46
C11
D84
E30
E52
http://www.sciencedirect.com/science/article/pii/S0165188911001217
Slobodyan, Sergey
Wouters, Raf
oai:RePEc:eee:dyncon:v:36:y:2012:i:1:p:47-622012-10-16RePEc:eee:dyncon
article
Endogenous business cycle propagation and the persistence problem: The role of labor-market frictions
Contrasting sharply with a recent trend in DSGE modeling, we propose a business cycle model where frictions and shocks are chosen with parsimony. The model emphasizes a few labor-market frictions and shocks to monetary policy and technology. The model, estimated from U.S. quarterly postwar data, accounts well for important differences in the serial correlation of the growth rates of aggregate quantities, the size of aggregate fluctuations and key comovements, including the correlation between hours and labor productivity. Despite its simplicity, the model offers an answer to the persistence problem (Chari et al., 2000) that does not rely on multiple frictions and adjustment lags or ad hoc backward-looking components. We conclude modern DSGE models need not embed large batteries of frictions and shocks to account for the salient features of postwar business cycles.
Business cycle propagation; Persistence problem; Sticky wages; Costly labor adjustment;
1
2012
36
47
62
E32
E62
http://www.sciencedirect.com/science/article/pii/S016518891100159X
Ambler, Steve
Guay, Alain
Phaneuf, Louis
oai:RePEc:eee:dyncon:v:36:y:2012:i:1:p:85-992012-10-16RePEc:eee:dyncon
article
Relative risk aversion and the transmission of financial crises
We study how investor behavior affects the transmission of financial crises. If investors exhibit decreasing relative risk aversion, then negative wealth shocks increase the risk premium required to hold risky assets. We integrate this into a second generation model of currency crises which allows for contagion through changes in fundamentals. Investor behavior can be a transmission channel of financial crises, as changes in risk premia increase the coverage ratio and makes the defense of a peg less attractive for the policy maker. The feedback effect of the risk premia on the probability of devaluation also makes multiple equilibria more likely. The possible stabilization effects of capital controls and a Tobin tax on the international transmission of financial crises are also studied.
Financial crises; Contagion; International asset pricing; Relative risk aversion; Wealth effects; Capital controls; Tobin tax;
1
2012
36
85
99
D91
E44
F31
F32
G11
G12
G15
http://www.sciencedirect.com/science/article/pii/S0165188911001679
Boschi, Melisso
Goenka, Aditya
oai:RePEc:eee:dyncon:v:36:y:2012:i:1:p:100-1182012-10-16RePEc:eee:dyncon
article
Real rigidities, productivity improvements and investment dynamics
The theoretical literature on business cycles predicts a positive investment response to productivity improvements, a prediction we question from theoretical and empirical perspectives. We show that a short-term negative response of investment to a positive technology shock is consistent with a reasonably parameterized new Keynesian dynamic stochastic general equilibrium (DSGE) model in which firm-specific capital introduces an additional real rigidity, and monetary policy is not fully accommodative. Employing Bayesian techniques, we provide evidence that permanent productivity improvements have short-term, contractionary effects on investment. Although this result can be obtained from both firm-specific and rental capital models, only in the case of the former is the average price duration in line with the microeconometric evidence.
Firm-specific capital; NK-DSGE model; Technology shocks; Investment dynamics; Bayesian inference;
1
2012
36
100
118
E32
E22
C11
http://www.sciencedirect.com/science/article/pii/S0165188911001680
Giuli, Francesco
Tancioni, Massimiliano
oai:RePEc:eee:dyncon:v:36:y:2012:i:1:p:1-252012-10-16RePEc:eee:dyncon
article
Varieties of agents in agent-based computational economics: A historical and an interdisciplinary perspective
In this paper, we trace four origins of agent-based computational economics (ACE), namely, the markets origin, the cellular-automata origin, the tournaments origin, and the experiments origin. Along with this trace, we examine how these origins have motivated different concepts and designs of agents in ACE, which starts from the early work on simple programmed agents, randomly behaving agents, zero-intelligence agents, human-written programmed agents, autonomous agents, and empirically calibrated agents, and extends to the newly developing cognitive agents, psychological agents, and culturally sensitive agents. The review also shows that the intellectual ideas underlying these varieties of agents cross several disciplines, which may be considered as a part of a general attempt to study humans (and their behavior) with an integrated interdisciplinary foundation.
Cellular automata; Autonomous agents; Tournaments; Genetic algorithms; Genetic programming; Cognitive capacity;
1
2012
36
1
25
http://www.sciencedirect.com/science/article/pii/S0165188911001692
Chen, Shu-Heng
oai:RePEc:eee:dyncon:v:37:y:2013:i:8:p:1641-16582013-07-19RePEc:eee:dyncon
article
Structural change and income distribution: An inverted-U relationship
This paper constructs a disequilibrium model in order to analyse the structural transition characterized by the emergence of a new sector. We show that, in an economy where preferences and technology adapt over time, multiple long-term outcomes are mainly brought about by different distributive rules governing the assignment of innovative rents between workers and entrepreneurs. We robustly establish that a successful transition to a two-sector economy is ensured by a balanced distribution restoring the co-ordination of investment and consumption plans. Instead, when innovative rents are too concentrated in favor of either workers or entrepreneurs, the system does not fully accomplish the transition and unemployment might emerge, in contrast, with the standard view of a negative relationship between real wages and employment.
Structural change; Income distribution; Unemployment; Innovation; Habit formation;
8
2013
37
1641
1658
E12
E24
O41
O43
http://www.sciencedirect.com/science/article/pii/S0165188913000249
Patriarca, Fabrizio
Vona, Francesco
oai:RePEc:eee:dyncon:v:37:y:2013:i:9:p:1872-18882013-07-19RePEc:eee:dyncon
article
Asymmetry in the jump-size distribution of the S&P 500: Evidence from equity and option markets
This paper studies alternative distributions for the size of price jumps in the S&P 500 index. We introduce a range of new jump-diffusion models and extend popular double-jump specifications that have become ubiquitous in the finance literature. The dynamic properties of these models are tested on both a long time series of S&P 500 returns and a large sample of European vanilla option prices. We discuss the in- and out-of-sample option pricing performance and provide detailed evidence of jump risk premia. Models with double-gamma jump size distributions are found to outperform benchmark models with normally distributed jump sizes.
Jump-size distribution; European options; S&P 500; Model calibration;
9
2013
37
1872
1888
G13
C13
C63
http://www.sciencedirect.com/science/article/pii/S0165188913000857
Kaeck, Andreas
oai:RePEc:eee:dyncon:v:37:y:2013:i:9:p:1929-19462013-07-19RePEc:eee:dyncon
article
The expected real return to equity
The expected return to equity – typically measured as a historical average – is a key variable in the decision making of investors. A recent literature uses analysts' forecasts, investor surveys or present-value relationships and finds estimates of expected returns that are sometimes much lower than historical averages. This study extends the present-value approach to a dynamic optimizing framework. Given a model that captures this relationship, one can use data on dividends, earnings and valuations to infer the model-implied expected return. Using this method, the estimated expected real return to equity ranges from 4.9% to 5.6% . Furthermore, the analysis indicates that expected returns have declined by about 3 percentage points over the past 40 years. These results indicate that future returns to equity may be lower than past realized returns.
Production-based asset pricing; Time-varying expected returns; Simulated method of moments; Aggregate earnings;
9
2013
37
1929
1946
E44
G12
http://www.sciencedirect.com/science/article/pii/S0165188913000808
Warusawitharana, Missaka
oai:RePEc:eee:dyncon:v:37:y:2013:i:9:p:1796-18132013-07-19RePEc:eee:dyncon
article
Search frictions, real wage rigidities and the optimal design of unemployment insurance
In this paper, we study the optimal unemployment benefits financing scheme when the economy is subject to labor market imperfections characterized by real wage rigidities and search frictions. The US unemployment insurance financing is such that firms are taxed proportionately to their layoffs to finance unemployment benefits. Using DSGE methodology, we investigate how policy instruments should interact with labor market imperfections. It is shown that wage rigidities in a search and matching environment cause welfare costs, especially in the absence of an incentive-based unemployment insurance. This cost is mainly due to the distorting effect of wage rigidities which generate inefficient separations. We show that the optimal unemployment benefits financing scheme – corresponding to the Ramsey policy – offsets labor market imperfections and allows implementation of the Pareto allocation. The second-best allocation brings the economy close to the Ramsey allocation. The implementation of the optimal policies clearly highlights the role of labor market institutions for short-run stabilization.
DSGE models; Search and matching frictions; Layoff tax; Wage rigidities;
9
2013
37
1796
1813
E61
E65
J63
J65
http://www.sciencedirect.com/science/article/pii/S0165188913000651
Albertini, Julien
Fairise, Xavier
oai:RePEc:eee:dyncon:v:37:y:2013:i:8:p:1500-15222013-07-19RePEc:eee:dyncon
article
Leaning against boom–bust cycles in credit and housing prices
This paper studies the potential gains of monetary and macro-prudential policies that lean against house-price and credit cycles. We rely on a model that features Borrowers and Savers and allows for over-borrowing induced by news-shock-driven cycles. We find that policy that responds to changes in financial variables is socially optimal. Considering the use of a single policy instrument, both types of agents are better off when the interest rate optimally responds to credit growth. When we allow for the implementation of both interest-rate and LTV policies, heterogeneity in the welfare implications is key in determining the optimal use of policy instruments. The optimal policy for the Borrowers is characterized by a LTV ratio that responds countercyclically to credit growth, which most effectively stabilizes credit relative to GDP. In contrast, the optimal policy for the Savers features a constant LTV ratio coupled with an interest-rate response to credit growth. News-shock-driven cycles account for most of the gains from a policy response to changes in financial variables.
Expectation-driven cycles; Macro-prudential policy; Monetary policy; Welfare analysis;
8
2013
37
1500
1522
E32
E44
E52
http://www.sciencedirect.com/science/article/pii/S0165188913000638
Lambertini, Luisa
Mendicino, Caterina
Teresa Punzi, Maria
oai:RePEc:eee:dyncon:v:37:y:2013:i:9:p:1736-17542013-07-19RePEc:eee:dyncon
article
Returns-to-scale and the equity premium puzzle
A model of heterogenous firms facing idiosyncratic risk is proposed which generates an equity premium of 6 per cent and a risk-free rate of 1.5 per cent even if aggregate returns are risk-free. The premium in this model reflects diminishing returns-to-scale and the fact that equity shares are equal claims to firm output. In the bond market, the risk-free rate reflects trade in assets at marginal rates of return with a linear technology and thus the equity premium in excess returns reflects a comparison of average returns with marginal returns. In the model, credit constraints lower the equity premium and, absent such constraints, the equity premium would roughly double. Since the model may be interpreted as a model of entrepreneurship, this paper also presents estimates from a structural model of entrepreneurship using data from the Survey of Consumer Finances and also finds only a modest level of risk aversion is sufficient to replicate entrepreneurial returns.
Equity premium; Risk-free rate; Returns-to-scale;
9
2013
37
1736
1754
E23
E43
E44
G11
G12
http://www.sciencedirect.com/science/article/pii/S0165188913000845
Dunbar, Geoffrey
oai:RePEc:eee:dyncon:v:37:y:2013:i:8:p:1692-17132013-07-19RePEc:eee:dyncon
article
Post-mortem examination of the international financial network
As the recent crisis has forcefully suggested, understanding financial-market interconnectedness is of a paramount importance to explain systemic risk, stability and economic dynamics. In this paper, we address these issues along two related perspectives. First, we explore the statistical properties of the International Financial Network (IFN), defined as a weighted-directed graph where nodes are countries and links represent debtor–creditor relationships in equities and short/long-run debt. We investigate whether the 2008 financial crisis has resulted in a significant change in the topological properties of the IFN. Our findings suggest that the crisis caused not only a reduction in the amount of securities traded, but also induced changes in the topology of the network and in the time evolution of its statistical properties. This has happened, however, without changing the disassortative, core-periphery structure of the IFN architecture. Second, we perform an econometric study to examine the ability of network-based measures to explain cross-country differences in crisis intensity. We investigate whether the conclusion of previous studies showing that international connectedness is not a relevant predictor of crisis intensity may be reversed, once one explicitly accounts for the position of each country within the IFN. We show that higher interconnectedness reduces the severity of the crisis, as it allows adverse shocks to dissipate quicker. However, being central in the network may make countries that are not members of a rich club more vulnerable in times of crisis. Finally, we find strong evidence of nonlinear effects, once the high degree of heterogeneity that characterizes the IFN is taken into account.
Financial networks; Crisis; Early warning systems;
8
2013
37
1692
1713
E65
F30
G01
http://www.sciencedirect.com/science/article/pii/S0165188913000183
Chinazzi, Matteo
Fagiolo, Giorgio
Reyes, Javier A.
Schiavo, Stefano
oai:RePEc:eee:dyncon:v:37:y:2013:i:9:p:1833-18512013-07-19RePEc:eee:dyncon
article
Inter-generational effect of parental time and its policy implications
Motivated by the empirical fact that parents with more human capital spend more time teaching and taking care of their children, we develop and estimate a theoretical model in which altruistic parents pass their human capital on in two ways: goods investment and time investment. Based on the estimated model, we quantitatively assess how the two types of investment affect wage inequality and inter-generational mobility. Using the model to study the impacts of a public policy that taxes income to finance public schooling, we find significantly different policy effects in our model than in a model where time investment does not respond endogenously to the policy.
Human capital production; Parental time investment; Wage inequality; Earnings persistence; Public schooling;
9
2013
37
1833
1851
E20
R20
R30
http://www.sciencedirect.com/science/article/pii/S0165188913000900
Zhu, Guozhong
Vural, Gulfer
oai:RePEc:eee:dyncon:v:37:y:2013:i:8:p:1683-16912013-07-19RePEc:eee:dyncon
article
Economic complexity: Conceptual grounding of a new metrics for global competitiveness
The availability of data corresponding to the products exported by all countries provides an excellent dataset to test economic ideas and extracts new information about the process of economic development. The matrix of countries and exported products shows a marked triangular structure instead of the block-diagonal structure expected from Ricardian arguments of specialization. This observation points to the fact that diversification is instead the dominant effect in the globalized market. We discuss how to define a suitable non-monetary metrics for the value of diversification and the effective complexity of products. We discuss in detail the previous proposed approaches to assess this challenge and their limitations. We introduce a new approach to the definition of these metrics which seems to overcome the previous problems and we test it in a series of model systems.
Economic complexity; Metrics; Country competitiveness; Product complexity; Export; Toy model;
8
2013
37
1683
1691
C02
O1
O49
http://www.sciencedirect.com/science/article/pii/S0165188913000833
Tacchella, A.
Cristelli, M.
Caldarelli, G.
Gabrielli, A.
Pietronero, L.
oai:RePEc:eee:dyncon:v:37:y:2013:i:8:p:1434-14522013-07-19RePEc:eee:dyncon
article
Formation of rationally heterogeneous expectations
This paper models expectation formation by taking into account that agents may produce heterogeneous expectations because of informational frictions and differing levels of a capacity to process information. We show that there are two general classes of steady states within this framework: those where strictly dominated forecasting rules vanish, and those heterogeneous states where a positive proportion of agents uses a more costly perfect foresight. We demonstrate that intrinsic heterogeneity can also arise in a model where the forecasting rules are not equally costly and do not exhibit identical performance in the long run.
Heterogeneous expectations; Cobweb model; Adaptive learning; Rational expectations;
8
2013
37
1434
1452
C62
D83
D84
E30
http://www.sciencedirect.com/science/article/pii/S0165188913000675
Pfajfar, Damjan
oai:RePEc:eee:dyncon:v:37:y:2013:i:9:p:1755-17702013-07-19RePEc:eee:dyncon
article
The spillover effects of biofuel policy on participation in the conservation reserve program
This paper studies the spillover effects of rising biofuel production on participation in the Conservation Reserve Program. Landowner participation decisions are modeled using a real options framework. We develop a land use decision model that captures biofuel-driven structural changes in market demand and derive threshold conditions that trigger participation in the program. We then quantify the impacts of biofuel production on participation at both the national and state levels using Monte Carlo simulations. The model is also used to analyze how changes in the persistence of the biofuel production boom and in the volatility of farming returns affect conservation participation decisions. Policy implications of the results are discussed.
Spillover; Biofuel production; Conservation reserve; Risk and uncertainty; Real options;
9
2013
37
1755
1770
C61
D81
Q24
http://www.sciencedirect.com/science/article/pii/S0165188913000687
Wu, Feng
Guan, Zhengfei
Yu, Fan
Myers, Robert J.
oai:RePEc:eee:dyncon:v:37:y:2013:i:8:p:1598-16252013-07-19RePEc:eee:dyncon
article
Income distribution, credit and fiscal policies in an agent-based Keynesian model
This work studies the relations between income distribution and monetary/fiscal policies using an credit-augmented version of the agent-based Keynesian model in Dosi et al. (2010). We model a banking sector and a monetary authority setting interest rates and credit lending conditions in a framework combining Keynesian mechanisms of demand generation, a Schumpeterian innovation-fueled process of growth and Minskian credit dynamics. We show that the model is able to account for a rich ensemble of empirical features underlying current and past recessions, including the impact of financial factors on the real economy, and the role in that of income distribution. We find that more unequal economies are exposed to more severe business cycles fluctuations, higher unemployment rates, and higher probability of crises. From a policy perspective, the model suggests that fiscal policies dampen business cycles, reduce unemployment and the likelihood of experiencing a huge crisis and, in some circumstances, also affect long-term growth. Furthermore, the more income distribution is skewed toward profits, the greater the effects of fiscal policies. Interest rates have instead a strong non-linear effect on macroeconomic dynamics. Tuning the interest rate when it is below a given threshold has no detectable effects. Conversely, increasing the interest rate when it is above that threshold yields lower and more volatile output growth, higher unemployment rates, and higher likelihood of crises.
Agent-based Keynesian models; Multiple equilibria; Fiscal and monetary policies; Income distribution; Transmission mechanisms; Credit constraints;
8
2013
37
1598
1625
E32
E44
E51
E52
E62
http://www.sciencedirect.com/science/article/pii/S0165188913000213
Dosi, Giovanni
Fagiolo, Giorgio
Napoletano, Mauro
Roventini, Andrea
oai:RePEc:eee:dyncon:v:37:y:2013:i:4:p:735-7552013-03-05RePEc:eee:dyncon
article
Heterogeneous beliefs and housing-market boom-bust cycles
This paper presents a business cycle model capturing the stylized features of housing-market boom-bust cycles in developed countries. The model implies that over-optimism of mortgage borrowers generates housing-market boom-bust cycles, if mortgage borrowers are credit-constrained and savers do not share their optimism. This result holds without price stickiness. If price stickiness is introduced into the model, then the model replicates a low policy interest rate during a housing boom as an endogenous reaction to a low inflation rate, given a Taylor rule. Thus, monetary easing observed during housing booms are consistent with the presence of over-optimism causing boom-bust cycles.
Asset price bubbles; Monetary policy; Financial liberalization; House prices; Credit constraints;
4
2013
37
735
755
E44
E52
http://www.sciencedirect.com/science/article/pii/S0165188912002163
Tomura, Hajime
oai:RePEc:eee:dyncon:v:37:y:2013:i:4:p:774-7932013-03-05RePEc:eee:dyncon
article
A flexible matrix Libor model with smiles
We present a flexible approach for the valuation of interest rate derivatives based on affine processes. We extend the methodology proposed in Keller-Ressel et al. (in press) by changing the choice of the state space. We provide semi-closed-form solutions for the pricing of caps and floors. We then show that it is possible to price swaptions in this multifactor setting with a good degree of analytical tractability. This is done via the Edgeworth expansion approach developed in Collin-Dufresne and Goldstein (2002). A numerical exercise illustrates the flexibility of Wishart Libor model in describing the movements of the implied volatility surface.
Affine processes; Wishart process; Libor market model; Fast Fourier transform; Caps; Floors; Swaptions;
4
2013
37
774
793
G13
C51
http://www.sciencedirect.com/science/article/pii/S0165188912002291
Da Fonseca, José
Gnoatto, Alessandro
Grasselli, Martino
oai:RePEc:eee:dyncon:v:37:y:2013:i:4:p:794-8092013-03-05RePEc:eee:dyncon
article
Characterization of a risk sharing contract with one-sided commitment
In this paper I provide a stopping-time-based solution to a long-term contracting problem between a risk-neutral principal and a risk-averse agent. The agent faces a stochastic income stream and cannot commit to the long-term contracting relationship. To compute the optimal contract, I also design an algorithm that is more efficient than value-function iteration.
Limited commitment; Risk sharing; Stopping time; Value-function iteration;
4
2013
37
794
809
C63
D82
D86
http://www.sciencedirect.com/science/article/pii/S0165188912002266
Zhang, Yuzhe
oai:RePEc:eee:dyncon:v:37:y:2013:i:4:p:854-8742013-03-05RePEc:eee:dyncon
article
Government education expenditures in early and late childhood
Human capital investment in early childhood can lead to large and persistent gains. Beyond this window of opportunity, human capital accumulation is more costly. Despite compelling evidence in support of this notion, government education spending is allocated disproportionately toward late childhood and young adulthood. We consider the consequences of a reallocation using an overlapping generations model with private and public spending on early and late childhood education. Taking as given the higher returns to early childhood investment, we find that the current allocation may nonetheless be appropriate. When we consider a homogeneous population, this can hold for moderate levels of government spending. With heterogeneity, this can hold for middle income workers. Lower income workers, by contrast, may benefit from a reallocation.
Government education expenditures; Human capital; Heterogeneous agents; Life-cycle model;
4
2013
37
854
874
E62
I22
H52
J24
http://www.sciencedirect.com/science/article/pii/S016518891200231X
Abington, Casey
Blankenau, William
oai:RePEc:eee:dyncon:v:37:y:2013:i:4:p:821-8372013-03-05RePEc:eee:dyncon
article
New insights into optimal control of nonlinear dynamic econometric models: Application of a heuristic approach
Optimal control of dynamic econometric models has a wide variety of applications including economic policy relevant issues. There are several algorithms extending the basic case of a linear-quadratic optimization and taking nonlinearity and stochastics into account, but being still limited in a variety of ways, e.g., symmetry of the objective function and identical data frequencies of control variables. To overcome these problems, an alternative approach based on heuristics is suggested. To this end, we apply a ‘classical’ algorithm (OPTCON) and a heuristic approach (Differential Evolution) to three different econometric models and compare their performance. In this paper we consider scenarios of symmetric and asymmetric quadratic objective functions. Results provide a strong support for the heuristic approach encouraging its further application to optimum control problems.
Differential evolution; Dynamic programming; Nonlinear optimization; Optimal control;
4
2013
37
821
837
C54
C61
E27
E61
E62
http://www.sciencedirect.com/science/article/pii/S0165188912002400
Blueschke, D.
Blueschke-Nikolaeva, V.
Savin, I.
oai:RePEc:eee:dyncon:v:37:y:2013:i:4:p:711-7342013-03-05RePEc:eee:dyncon
article
Deregulation shock in product market and unemployment
In a dynamic general equilibrium model with endogenous markups and labor market frictions, we investigate the effects of increased product market competition. Unlike most macroeconomic models of search, we endogenize the labor supply along the extensive margin. We find numerically that a model with endogenous labor force participation decision produces a decline in the unemployment rate which is almost three times larger than that in a model with fixed labor force. For a calibration capturing alternatively the European and the US labor markets, a deregulation episode, which lowers the markup by 3 percentage points, results in a fall in the unemployment rate by 0.17 and 0.05 percentage point, respectively, while the labor share is almost unaffected in the long-run. The sensitivity analysis reveals that product market deregulation is more effective in countries where product and labor market regulations are high, unemployment benefits are small and labor force is more responsive.
Imperfect competition; Endogenous markup; Search theory; Unemployment; Deregulation;
4
2013
37
711
734
E24
J63
L16
http://www.sciencedirect.com/science/article/pii/S0165188912002187
Bertinelli, Luisito
Cardi, Olivier
Sen, Partha
oai:RePEc:eee:dyncon:v:37:y:2013:i:4:p:838-8532013-03-05RePEc:eee:dyncon
article
Oligopoly exploitation of a private property productive asset
In this paper, we build a Closed-Loop Nash Equilibrium of a private property productive asset oligopoly. We compare and contrast private with common property in terms of exploitation rates and social welfare, and provide a comparative dynamic analysis with respect to the number of firms in the industry. Contrary to previous studies on oligopolistic exploitation of productive assets, before exploitation begins, the resource is parcelled out: each firm privately owns and manages the assigned parcel over the entire planning horizon. Compared with the common property regime, we find a new set of results, both in the short- and in the long-run. As for social welfare, we provide conditions on the implicit growth rate and the initial asset stock under which the socially optimal allocation of the resource implies a natural monopoly.
Closed-Loop Nash Equilibrium; Productive assets; Private property; Common property; Oligopoly;
4
2013
37
838
853
D43
L13
Q20
C73
http://www.sciencedirect.com/science/article/pii/S0165188912002308
Colombo, Luca
Labrecciosa, Paola
oai:RePEc:eee:dyncon:v:37:y:2013:i:4:p:875-8962013-03-05RePEc:eee:dyncon
article
Pricing Parisian and Parasian options analytically
In this paper, two analytic solutions for the valuation of European-style Parisian and Parasian options under the Black–Scholes framework are, respectively, presented. A key feature of our solution procedure is the reduction of a three-dimensional problem to a two-dimensional problem through a coordinate transform designed to combine the two time derivatives into one. Compared with some previous analytical solutions, which still require a numerical inversion of Laplace transform, our solutions, written in terms of double integral for the case of Parisian options but multiple integrals for the case of Parasian options, are both of explicit form; numerical evaluation of these integrals is straightforward. Numerical examples are also provided to demonstrate the correctness of our newly derived analytical solutions from the numerical point of view, through comparing the results obtained from our solutions and those obtained from adopting other standard finite difference approaches.
Parisian options; Parasian options; Analytical solution; Laplace transform;
4
2013
37
875
896
G13
C02
http://www.sciencedirect.com/science/article/pii/S0165188912002424
Zhu, Song-Ping
Chen, Wen-Ting
oai:RePEc:eee:dyncon:v:37:y:2013:i:4:p:810-8202013-03-05RePEc:eee:dyncon
article
The intrinsic comparative dynamics of infinite horizon optimal control problems with a time-varying discount rate and time-distance discounting
The intrinsic comparative dynamics of a ubiquitous class of optimal control problems with a time-varying discount rate and time-distance discounting are derived and shown to be characterized by a positive semidefinite matrix. It is also shown that the said comparative dynamics are invariant to the functional form of the discount rate function and the type of agent. Consequently, if one limits econometric testing to the basic comparative dynamics of the given class of control problems, one cannot determine (i) the functional form of the discount rate function used by an agent, and thus if an agent is a time-consistent or time-inconsistent decision maker, or (ii) if an agent commits to a plan of action or takes into account the changing nature of his preferences when choosing a plan.
Comparative dynamics; Optimal control; Precommitment solution; Sophisticated solution; Time-distance discounting; Time inconsistency; Time-varying discount rate;
4
2013
37
810
820
http://www.sciencedirect.com/science/article/pii/S0165188912002321
Caputo, Michael R.
oai:RePEc:eee:dyncon:v:33:y:2009:i:11:p:1867-18792014-12-11RePEc:eee:dyncon
article
On nonrenewable resource oligopolies: The asymmetric case
We give a full characterization of the open-loop Nash equilibrium of a nonrenewable resource game between two types of firms differing in extraction costs. We show that (i) there almost always exists a phase where both types of firms supply simultaneously, (ii) when the high cost mines are exploited by a number of firms that goes to infinity the equilibrium approaches the cartel-versus-fringe equilibrium with the fringe firms acting as price takers, and (iii) the cheaper resource may not be exhausted first, a violation of the Herfindahl rule, that may be detrimental to social welfare.
Nonrenewable resources Nash equilibrium Cartel versus fringe Open loop
11
2009
33
11
1867
1879
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00111-0
Benchekroun, Hassan
Halsema, Alex
Withagen, Cees
oai:RePEc:eee:dyncon:v:34:y:2010:i:3:p:472-4892014-12-11RePEc:eee:dyncon
article
A reliable and computationally efficient algorithm for imposing the saddle point property in dynamic models
This paper describes a set of algorithms for quickly and reliably solving linear rational expectations models. The utility, reliability and speed of these algorithms are a consequence of (1) the algorithm for computing the minimal dimension state space transition matrix for models with arbitrary numbers of lags or leads, (2) the availability of a simple modeling language for characterizing a linear model and (3) the use of the QR Decomposition and Arnoldi type eigenspace calculations. The paper also presents new formulae for computing and manipulating solutions for arbitrary exogenous processes.
Linear rational expectations Blanchard-Kahn Saddle point solution
3
2010
34
3
472
489
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00192-4
Anderson, Gary S.
oai:RePEc:eee:dyncon:v:33:y:2009:i:11:p:1912-19282014-12-11RePEc:eee:dyncon
article
More hedging instruments may destabilize markets
This paper formalizes the idea that more hedging instruments may destabilize markets when traders have heterogeneous expectations and adapt their behavior according to performance-based reinforcement learning. In a simple asset pricing model with heterogeneous beliefs the introduction of additional Arrow securities may destabilize markets, and thus increase price volatility, and at the same time decrease average welfare. We also investigate whether a fully rational agent can employ additional hedging instruments to stabilize markets. It turns out that the answer depends on the composition of the population of non-rational traders and the information gathering costs for rationality.
Financial innovation Asset pricing Hedging Reinforcement learning Bifurcations
11
2009
33
11
1912
1928
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00115-8
Brock, W.A.
Hommes, C.H.
Wagener, F.O.O.
oai:RePEc:eee:dyncon:v:34:y:2010:i:1:p:42-492014-12-11RePEc:eee:dyncon
article
Solving the incomplete markets model with aggregate uncertainty using the Krusell-Smith algorithm
This paper studies the properties of the solution to the heterogeneous agents model in Den Haan et al. [2009. Computational suite of models with heterogeneous agents: incomplete markets and aggregate uncertainty. Journal of Economic Dynamics and Control, this issue]. To solve for the individual policy rules, we use an Euler-equation method iterating on a grid of pre-specified points. To compute the aggregate law of motion, we use the stochastic-simulation approach of Krusell and Smith [1998. Income and wealth heterogeneity in the macroeconomy. Journal of Political Economy 106, 868-896]. We also compare the stochastic- and non-stochastic-simulation versions of the Krusell-Smith algorithm, and we find that the two versions are similar in terms of their speed and accuracy.
Dynamic stochastic models Heterogeneous agents Aggregate uncertainty Euler-equation methods Simulations Numerical solutions
1
2010
34
1
42
49
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00132-8
Maliar, Lilia
Maliar, Serguei
Valli, Fernando
oai:RePEc:eee:dyncon:v:34:y:2010:i:3:p:542-5542014-12-11RePEc:eee:dyncon
article
A lattice algorithm for pricing moving average barrier options
This paper presents a lattice algorithm for pricing both European- and American-style moving average barrier options (MABOs). We develop a finite-dimensional partial differential equation (PDE) model for discretely monitored MABOs and solve it numerically by using a forward shooting grid method. The modeling PDE for continuously monitored MABOs has infinite dimensions and cannot be solved directly by any existing numerical method. We find their approximate values indirectly by using an extrapolation technique with the prices of discretely monitored MABOs. Numerical experiments show that our algorithm is very efficient.
Barrier option Moving average Lattice algorithm Forward shooting grid method Extrapolation
3
2010
34
3
542
554
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00196-1
Dai, Min
Li, Peifan
Zhang, Jin E.
oai:RePEc:eee:dyncon:v:33:y:2009:i:6:p:1183-12002014-12-11RePEc:eee:dyncon
article
Real wages over the business cycle: OECD evidence from the time and frequency domains
We study differences in the adjustment of aggregate real wages in the manufacturing sector over the business cycle across OECD countries, combining results from different data and dynamic methods. Summary measures of cyclicality show genuine cross-country heterogeneity even after controlling for the impact of data and methods. We find that more open economies and countries with stronger unions tend to have less pro-cyclical (or more counter-cyclical) wages. We also find a positive correlation between the cyclicality of real wages and employment, suggesting that policy complementarities may influence the adjustment of both quantities and prices in the labor market.
Real wages Business cycle Dynamic correlation Labor market institutions
6
2009
33
6
1183
1200
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00210-8
Messina, Julian
Strozzi, Chiara
Turunen, Jarkko
oai:RePEc:eee:dyncon:v:33:y:2009:i:2:p:477-4902014-12-11RePEc:eee:dyncon
article
Structural changes in the US economy: Is there a role for monetary policy?
This paper investigates the contribution of monetary policy to the changes in output growth and inflation dynamics in the US. We identify a policy shock and a policy rule in a time-varying coefficients VAR using robust sign restrictions. The transmission of policy shocks has been relatively stable. The variance of the policy shock has decreased over time, but policy shocks account for a small fraction of the level and the variations in inflation and output growth volatility and persistence. Finally we find little evidence of a significant increase in the long run response of the interest rate to inflation.
Monetary policy Inflation persistence Transmission of shocks Time-varying coefficients structural VARs
2
2009
33
2
477
490
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00141-3
Canova, Fabio
Gambetti, Luca
oai:RePEc:eee:dyncon:v:34:y:2010:i:2:p:179-1902014-12-11RePEc:eee:dyncon
article
Adaptive learning with a unit root: An application to the current account
This paper develops a simple two-country, two-good model of international trade and borrowing that suppresses all previous sources of current account dynamics. Under rational expectations, international debt follows a random walk. Under adaptive learning, however, the model's unit root is eliminated and international debt is either a stationary or an explosive process, depending on agents' specific learning algorithm. Some stationary learning algorithms result in debt following an AR(1) process with an autoregressive coefficient less than 0.8. Because unit roots are a common and problematic feature of many international business cycle models, our results offer a new approach for generating stationarity.
Current account International debt movements Expectations Adaptive learning
2
2010
34
2
179
190
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00158-4
Davies, Ronald B.
Shea, Paul
oai:RePEc:eee:dyncon:v:33:y:2009:i:8:p:1577-15922014-12-11RePEc:eee:dyncon
article
Modelling long memory and structural breaks in conditional variances: An adaptive FIGARCH approach
This paper introduces a new long memory volatility process, denoted by adaptive FIGARCH, or A-FIGARCH , which is designed to account for both long memory and structural change in the conditional variance process. Structural change is modeled by allowing the intercept to follow the smooth flexible functional form due to Gallant (1984. The Fourier flexible form. American Journal of Agricultural Economics 66, 204-208). A Monte Carlo study finds that the A-FIGARCH model outperforms the standard FIGARCH model when structural change is present, and performs at least as well in the absence of structural instability. An empirical application to stock market volatility is also included to illustrate the usefulness of the technique.
FIGARCH Long memory Structural change Stock market volatility
8
2009
33
8
1577
1592
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00045-1
Baillie, Richard T.
Morana, Claudio
oai:RePEc:eee:dyncon:v:33:y:2009:i:6:p:1201-12162014-12-11RePEc:eee:dyncon
article
Chaos in the cobweb model with a new learning dynamic
The new learning dynamic of Brown et al. [(1950). Solutions of games by differential equation. In: Kuhn, H.W., Tucker, A.W. (Eds.), Contributions to the Theory of Games I. Annals of Mathematics Studies, vol. 24. Princeton University Press, Princeton] is introduced to macroeconomic dynamics via the cobweb model with rational and naive forecasting strategies. This dynamic has appealing properties such as positive correlation and inventiveness. There is persistent heterogeneity in the forecasts and chaotic behavior with bifurcations between periodic orbits and strange attractors for the same range of parameter values as in previous studies. Unlike Brock and Hommes [(1997). A rational route to randomness. Econometrica (65), 1059-1095], however, there exist intuitively appealing steady states where one strategy dominates, and there are qualitative differences in the resulting dynamics of the two approaches. There are similar bifurcations in a parameter that represents how aggressively agents switch to better performing strategies.
Chaos Cobweb model Learning BNN
6
2009
33
6
1201
1216
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00212-1
Waters, George A.
oai:RePEc:eee:dyncon:v:33:y:2009:i:8:p:1593-16032014-12-11RePEc:eee:dyncon
article
Single-leader-multiple-follower games with boundedly rational agents
This paper studies a class of hierarchical games called single-leader-multiple-follower games (SLMFGs) that have important applications in economics and engineering. We consider such games in the context of boundedly rational agents that are limited in the information and computational power they may possess. Agents in our SLMFG are modeled as adaptive learners that use simple reinforcement learning schemes to learn their optimal behavior. The proposed learning approach is illustrated using a well-studied problem in economics. It is shown that with a patiently learning leader the repeated plays of the game result in approximate equilibrium outcomes.
Leader-follower games Bounded rationality Reinforcement learning
8
2009
33
8
1593
1603
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00046-3
Tharakunnel, Kurian
Bhattacharyya, Siddhartha
oai:RePEc:eee:dyncon:v:33:y:2009:i:9:p:1719-17382014-12-11RePEc:eee:dyncon
article
Behavioral heterogeneity in dynamic search situations: Theory and experimental evidence
This paper presents models for search behavior and provides experimental evidence that behavioral heterogeneity in search is linked to heterogeneity in individual preferences. Observed search behavior is more consistent with a new model that assumes dynamic updating of utility reference points than with models that are based on expected-utility maximization. Specifically, reference point updating and loss aversion play a role for more than a third of the population. The findings are of practical relevance as well as of interest for researchers who incorporate behavioral heterogeneity into models of dynamic choice behavior in, for example, consumer economics, labor economics, finance, and decision theory.
Dynamic choice Behavioral heterogeneity Reference points Individual differences Loss aversion
9
2009
33
9
1719
1738
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00073-6
Schunk, Daniel
oai:RePEc:eee:dyncon:v:33:y:2009:i:10:p:1739-17562014-12-11RePEc:eee:dyncon
article
Learning games
This paper presents a model of learning about a game. Players initially have little knowledge about the game. Through playing the same game repeatedly, each player not only learns which action to choose but also constructs a personal view of the game. The model is studied using a hybrid payoff matrix of the prisoner's dilemma and coordination games. Results of computer simulations show that (1) when all the players are slow at learning the game, they have only a partial understanding of the game, but might enjoy higher payoffs than in cases with full or no understanding of the game; (2) when one player is quick in learning the game, that player obtains a higher payoff than the others. However, all can receive lower payoffs than in the case in which all players are slow learners.
Learning Subjective views Computer simulation
10
2009
33
10
1739
1756
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00074-8
Hanaki, Nobuyuki
Ishikawa, Ryuichiro
Akiyama, Eizo
oai:RePEc:eee:dyncon:v:33:y:2009:i:8:p:1543-15542014-12-11RePEc:eee:dyncon
article
Stochastic adaptation in finite games played by heterogeneous populations
We analyze stochastic adaptation in finite n-player games played by heterogeneous populations containing best repliers, better repliers, and imitators. Individuals select strategies by applying a personal learning rule to a sample from a finite history of past play. We give sufficient conditions for convergence to minimal closed sets under better replies and selection of a Pareto dominant such set. Finally, we demonstrate that the stochastically stable states are sensitive to the sample size by showing convergence to the risk-dominant equilibrium for sufficiently small sample size and to the Pareto-dominant equilibrium for sufficiently large sample size in 2x2 coordination games.
Heterogeneous agents Markov chain Stochastic stability Pareto dominance Risk dominance
8
2009
33
8
1543
1554
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00043-8
Josephson, Jens
oai:RePEc:eee:dyncon:v:33:y:2009:i:10:p:1824-18362014-12-11RePEc:eee:dyncon
article
Can a stochastic cusp catastrophe model explain stock market crashes?
This paper is the first attempt to fit a stochastic cusp catastrophe model to stock market data. We show that the cusp catastrophe model explains the crash of stock exchanges much better than other models. Using the data of U.S. stock markets we demonstrate that the crash of October 19, 1987, may be better explained by cusp catastrophe theory, which is not true for the crash of September 11, 2001. With the help of sentiment measures, such as the index put/call options ratio and trading volume (the former models the chartists, the latter the fundamentalists), we have found that the 1987 returns are bimodal, and the cusp catastrophe model fits these data better than alternative models. Therefore we may say that the crash has been led by internal forces. However, the causes for the crash of 2001 are external, which is also evident in much weaker presence of bifurcations in the data. In this case, alternative models explain the crash of stock exchanges better than the cusp catastrophe model.
Stochastic cusp catastrophe Bifurcations Singularity Nonlinear dynamics Stock market crash
10
2009
33
10
1824
1836
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00101-8
Barunik, J.
Vosvrda, M.
oai:RePEc:eee:dyncon:v:33:y:2009:i:4:p:864-8822014-12-11RePEc:eee:dyncon
article
Comparing DSGE-VAR forecasting models: How big are the differences?
I generate priors for a vector autoregression (VAR) from a standard real business cycle (RBC) model, an RBC model with capital-adjustment costs and habit formation, and a sticky-price model with an unaccommodating monetary authority. The response of hours worked to a TFP shock differs sharply across these models. I compare the accuracy of forecasts made from each of the resulting dynamic stochastic general equilibrium vector autoregression (DSGE-VAR) models. Despite having different structural characteristics, the DSGE-VARs are comparable in terms of forecasting performance. As in previous work, DSGE-VARs compare favorably with atheoretical VARs.
Model evaluation Priors from DSGE models Economic fluctuations Hours debate Business cycles
4
2009
33
4
864
882
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00183-8
Ghent, Andra C.
oai:RePEc:eee:dyncon:v:34:y:2010:i:3:p:437-4552014-12-11RePEc:eee:dyncon
article
On-the-job search, sticky prices, and persistence
Models of the monetary transmission mechanism often generate empirically implausible business fluctuations. This paper analyzes the role of on-the-job search in the propagation of monetary shocks in a sticky price model with labor market search frictions. Such frictions induce long-term employment relationships, such that the real marginal cost is determined by real wages and the cost of an employment relationship. On-the-job search opens up an extra channel of employment growth that dampens the response of these two components. Because real marginal cost rigidity induces small price adjustments, on-the-job search gives rise to a strong propagation of monetary shocks that increases output persistence.
On-the-job search Cost of an employment relationship Sticky prices Business fluctuations
3
2010
34
3
437
455
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00182-1
Van Zandweghe, Willem
oai:RePEc:eee:dyncon:v:33:y:2009:i:12:p:2015-20292014-12-11RePEc:eee:dyncon
article
Jealousy and underconsumption in a one-sector model with wealth preference
The present paper examines the effects of consumption externalities on economic performance in a one-sector model with wealth preference. The presence of the wealth preference generates a wealth effect in consumption growth, which plays a crucial role for consumption externalities to have impacts on the economy. Our main findings are: (i) regardless of the assumption of inelastic labor supply, the distortionary effect of consumption externalities stays in the long run; (ii) the income tax as well as the consumption tax can modify the efficiency; and (iii) the numerical simulations supplement theoretical findings.
Consumption externalities Wealth preference Wealth effect Optimal tax policy Intertemporal welfare
12
2009
33
12
2015
2029
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00146-8
Nakamoto, Yasuhiro
oai:RePEc:eee:dyncon:v:34:y:2010:i:1:p:4-272014-12-11RePEc:eee:dyncon
article
Comparison of solutions to the incomplete markets model with aggregate uncertainty
This paper compares numerical solutions to the model of Krusell and Smith [1998. Income and wealth heterogeneity in the macroeconomy. Journal of Political Economy 106, 867-896] generated by different algorithms. The algorithms have very similar implications for the correlations between different variables. Larger differences are observed for (i) the unconditional means and standard deviations of individual variables, (ii) the behavior of individual agents during particularly bad times, (iii) the volatility of the per capita capital stock, and (iv) the behavior of the higher-order moments of the cross-sectional distribution. For example, the two algorithms that differ the most from each other generate individual consumption series that have an average (maximum) difference of 1.63% (11.4%).
Numerical solutions Approximations
1
2010
34
1
4
27
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00129-8
Den Haan, Wouter J.
oai:RePEc:eee:dyncon:v:34:y:2010:i:3:p:456-4712014-12-11RePEc:eee:dyncon
article
Robust monetary rules under unstructured model uncertainty
This paper revisits a widely adopted approach to robust decision making developed by (Hansen and Sargent, 2003) and (Hansen and Sargent, 2008)--henceforth HS--and applies it to monetary policy design in the face of model uncertainty. We pay particular attention to two issues: first, we distinguish three possible forms of the implied game between malign nature and the policymaker in the HS procedure each leading to a different robust and approximating equilibria. Second, we impose the zero lower bound (ZLB) constraint on the nominal interest rate. We show that the ZLB constraint has serious consequences for a policymaker pursuing HS-type robustness, especially when accompanied by an inability to commit.
Robustness Unstructured uncertainty Commitment Zero lower bound interest rate constraint
3
2010
34
3
456
471
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00191-2
Levine, Paul
Pearlman, Joseph
oai:RePEc:eee:dyncon:v:33:y:2009:i:11:p:1858-18662014-12-11RePEc:eee:dyncon
article
Pooling forecasts in linear rational expectations models
Estimating linear rational expectations models in a limited-information setting requires replacing the expectations of future, endogenous variables either with instrumented, actual values or with forecast survey data. Applying the method of Gottfries and Persson [Empirical examinations of the information sets of economic agents. Quarterly Journal of Economics 103, 251-259], I show how to augment these methods with actual, future values of the endogenous variables to improve statistical efficiency. The method is illustrated with an application to the US hybrid new Keynesian Phillips curve, where traditional, lagged instruments and the median forecast from the Survey of Professional Forecasters both appear to miss significant information used by price-setters, so that forecast pooling with actual values improves the statistical fit to inflation.
Forecast pooling Recursive projection New Keynesian Phillips curve
11
2009
33
11
1858
1866
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00103-1
Smith, Gregor W.
oai:RePEc:eee:dyncon:v:33:y:2009:i:9:p:1682-16982014-12-11RePEc:eee:dyncon
article
Life-cycle portfolio choice: The role of heterogeneous under-diversification
In life-cycle portfolio choice models it is standard to assume that all agents invest in a diversified stock market index. In contrast recent empirical evidence, summarized in Campbell [2006. Household finance. Journal of Finance 61, 1553-1604] suggests that households' financial portfolios are under-diversified and that there is substantial heterogeneity in diversification. In the present paper I examine the effects of heterogeneous under-diversification in a life-cycle portfolio choice model with uninsurable uncertain earnings and fixed per-period participation costs. The analysis of the model shows that realistically calibrated under-diversification gives an important contribution to the explanation of two key facts of households' portfolio allocation: the moderate stock market participation rate and the moderate stock share for participants.
Portfolio choice Life-cycle Under-diversification Retirement wealth
9
2009
33
9
1682
1698
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00064-5
Campanale, Claudio
oai:RePEc:eee:dyncon:v:33:y:2009:i:12:p:1991-20002014-12-11RePEc:eee:dyncon
article
Capital-labor substitution and equilibrium indeterminacy
This paper examines the quantitative relationship between the elasticity of capital-labor substitution in production and the conditions needed for equilibrium indeterminacy (and belief-driven fluctuations) in a one-sector growth model. With variable capital utilization, the substitution elasticity has little quantitative impact on the minimum degree of increasing returns needed for indeterminacy. However, when capital utilization is constant, a below-unity substitution elasticity sharply raises the minimum degree of increasing returns because it imposes a higher effective adjustment cost on labor hours. Overall, our results show that empirically-plausible departures from the Cobb-Douglas production specification can make indeterminacy more difficult to achieve.
Capital-labor substitution Equilibrium indeterminacy Capital utilization Real business cycles Sunspots
12
2009
33
12
1991
2000
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00127-4
Guo, Jang-Ting
Lansing, Kevin J.
oai:RePEc:eee:dyncon:v:33:y:2009:i:7:p:1469-14892014-12-11RePEc:eee:dyncon
article
Optimal monetary policy in economies with dual labor markets
We present a dynamic stochastic general equilibrium (DSGE) New Keynesian model with indivisible labor and a dual labor market: a Walrasian one where wages are fully flexible and a unionized one characterized by real wage rigidity. We show that the negative effect of a productivity shock on inflation and the positive effect of a cost-push shock are crucially determined by the proportion of firms that belong to the unionized sector. The larger this number, the larger are these effects. Consequently, the larger the union coverage, the larger should be the optimal response of the nominal interest rate to exogenous productivity and cost-push shocks. The optimal inflation and output gap volatility increases as the number of the unionized firms in the economy increases.
Optimal monetary policy Trade-unions Real wage rigidity Taylor rules
7
2009
33
7
1469
1489
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00041-4
Mattesini, Fabrizio
Rossi, Lorenza
oai:RePEc:eee:dyncon:v:33:y:2009:i:7:p:1437-14502014-12-11RePEc:eee:dyncon
article
A quantitative exploration of the Golden Age of European growth
Income per capita in some Western European countries more than tripled in the two and a half decades that followed World War II. The literature has identified several factors behind this outstanding growth episode, specifically; structural change, the Marshall Plan combined with the public provision of infrastructure, the surge of intra-European trade, and the reconstruction process that followed the war. This paper is an attempt to formalize and quantify the contribution of each one of these factors to post-war growth. Our results highlight the importance of reconstruction growth and structural change, and point to the limited role of the Marshall Plan, and the late contribution of intra-European trade.
Economic growth European economic history 1913- CGE models
7
2009
33
7
1437
1450
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00039-6
Alvarez-Cuadrado, Francisco
Pintea, Mihaela I.
oai:RePEc:eee:dyncon:v:33:y:2009:i:12:p:1962-19802014-12-11RePEc:eee:dyncon
article
Optimal timing of management turnover under agency problems
We explore the timing of the replacement of a manager as an important incentive mechanism, using a real options approach in a situation where the timing of the decision to replace the manager is related to a major change in a firm's strategies that involves spending large amounts of various sunk adjustment costs. Using a continuous-time agency setting, we show that when renegotiation is not possible, the early replacement of the manager of a lower quality project (prior to the first-best trigger level) occurs only if a moral hazard or an adverse selection problem exists. We also indicate that the possibility of renegotiation drastically changes the results.
Agency CEO turnover Executive compensation Real options Renegotiation
12
2009
33
12
1962
1980
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00125-0
Hori, Keiichi
Osano, Hiroshi
oai:RePEc:eee:dyncon:v:34:y:2010:i:1:p:1-32014-12-11RePEc:eee:dyncon
article
Computational suite of models with heterogeneous agents: Incomplete markets and aggregate uncertainty
This paper describes the first model considered in the computational suite project that compares different numerical algorithms. It is an incomplete markets economy with a continuum of agents and an inequality (borrowing) constraint.
Numerical solutions Simulations Approximations
1
2010
34
1
1
3
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00128-6
Den Haan, Wouter J.
Judd, Kenneth L.
Juillard, Michel
oai:RePEc:eee:dyncon:v:33:y:2009:i:7:p:1419-14362014-12-11RePEc:eee:dyncon
article
Endogenous growth and adverse selection in entrepreneurship
This paper proposes a model of Schumpeterian endogenous growth incorporating the role of market imperfections that exist due to adverse selection between investors that finance R&D and entrepreneurs that perform R&D. There is a distribution of agents indexed by a skill factor that determines one's average productivity at performing research. An entrepreneur starts-up a research venture by borrowing from an investor that funds R&D so as to invent new goods. Skill is private information, creating an adverse selection problem for the investor who designs a truth-telling mechanism. We show that an increase in the mean skill enhances growth as it leads to greater R&D productivity and investment; while an increase in the dispersion of the skill distribution dampens growth as it makes the adverse selection problem between investors and entrepreneurs more severe. The growth rate would double in the absence of adverse selection. The R&D investment of the average size firm must be subsidized threefold for the negative adverse selection effect to be nullified. We provide U.S. industry-level and European sector-level evidence in favor of the positive scale effect and negative adverse selection effect using the firm size distribution (FSD) to proxy for the entrepreneurial skill distribution.
Asymmetric information Mechanism design Innovation Technological change
7
2009
33
7
1419
1436
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00038-4
Plehn-Dujowich, Jose M.
oai:RePEc:eee:dyncon:v:34:y:2010:i:3:p:490-5022014-12-11RePEc:eee:dyncon
article
An adverse selection model of optimal unemployment insurance
We ask whether offering a menu of unemployment insurance contracts is welfare-improving in a heterogeneous population. We adopt a repeated moral hazard framework as in Shavell and Weiss (1979), supplemented by unobserved heterogeneity about agents' job opportunities. Our main theoretical contribution is a quasi-recursive formulation of our adverse selection problem, including a geometric characterization of the state space. Our main economic result is that optimal contracts for "bad" searchers tend to be upward-sloping due to an adverse selection effect. This is in contrast to the well-known optimal decreasing time profile of benefits in pure moral hazard environments that continue to be optimal for "good" searchers in our model.
Unemployment insurance Recursive contracts Adverse selection Repeated moral hazard
3
2010
34
3
490
502
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00193-6
Hagedorn, Marcus
Kaul, Ashok
Mennel, Tim
oai:RePEc:eee:dyncon:v:33:y:2009:i:8:p:1617-16292014-12-11RePEc:eee:dyncon
article
Delegation, time inconsistency and sustainable equilibrium
This paper analyzes the effectiveness of delegation in solving the time inconsistency problem of monetary policy using a microfounded general equilibrium model where delegation and reappointment are explicitly included into the government's strategy. The method of Chari and Kehoe [1990. Sustainable plans. Journal of Political Economy 98 (4), 783-802] is applied to characterize the entire set of sustainable outcomes. Countering McCallum's [1995. Two fallacies concerning central-bank independence. American Economic Review 85 (2), 207-211] second fallacy, delegation is able to eliminate the time inconsistency problem, with the commitment policy being sustained under discretion for any intertemporal discount rate.
Central bank Monetary policy Institutional design
8
2009
33
8
1617
1629
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00048-7
Basso, Henrique S.
oai:RePEc:eee:dyncon:v:33:y:2009:i:7:p:1490-15302014-12-11RePEc:eee:dyncon
article
White discrimination in provision of black education: Plantations and towns
We present a model of public provision of education for blacks in two discriminatory regimes, white plantation controlled, and white yeoman-town controlled. We show that the ability to migrate to a non-discriminating district constrains the ability of both types of regimes to discriminate. The model produces time series of educational outcomes for whites and blacks that mimic the behavior seen in Post Reconstruction South Carolina to the onset of the Civil Rights Act. It also fits the Post World War II black-white income differentials.
Discrimination Education Development Income convergence
7
2009
33
7
1490
1530
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00049-9
Canaday, Neil
Tamura, Robert
oai:RePEc:eee:dyncon:v:34:y:2010:i:1:p:36-412014-12-11RePEc:eee:dyncon
article
Solving the incomplete markets model with aggregate uncertainty using the Krusell-Smith algorithm and non-stochastic simulations
This article describes the approach to computing the version of the stochastic growth model with idiosyncratic and aggregate risk that relies on collapsing the aggregate state space down to a small number of moments used to forecast future prices. One innovation relative to most of the literature is the use of a non-stochastic simulation routine.
Idiosyncratic risk Business cycles Numerical methods
1
2010
34
1
36
41
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00131-6
Young, Eric R.
oai:RePEc:eee:dyncon:v:33:y:2009:i:9:p:1639-16472014-12-11RePEc:eee:dyncon
article
Life-cycle savings, bequest, and a diminishing impact of scale on growth
The present paper shows that the savings motive critically affects the size and sign of scale effects in standard endogenous growth models. If the bequest motive dominates, the scale effect is positive. If the life-cycle motive dominates, the scale effect is ambiguous and may even be negative.
Overlapping generations Endogenous growth Scale effects
9
2009
33
9
1639
1647
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00051-7
Dalgaard, Carl-Johan
Jensen, Martin Kaae
oai:RePEc:eee:dyncon:v:33:y:2009:i:7:p:1398-14182014-12-11RePEc:eee:dyncon
article
Estimated U.S. manufacturing production capital and technology based on an estimated dynamic structural economic model
Production capital and total factor productivity or technology are fundamental to understanding output and productivity growth, but are unobserved except at disaggregated levels and must be estimated before being used in empirical analysis. In this paper, we develop estimates of production capital and technology for U.S. total manufacturing based on an estimated dynamic structural economic model. First, using annual U.S. total manufacturing data for 1947-1997, we estimate by maximum likelihood a dynamic structural economic model of a representative production firm. In the estimation, capital and technology are completely unobserved or latent variables. Then, we apply the Kalman filter to the estimated model and the data to compute estimates of model-based capital and technology for the sample. Finally, we describe and evaluate similarities and differences between the model-based and standard estimates of capital and technology reported by the Bureau of Labor Statistics.
Kalman filter estimation of latent variables
7
2009
33
7
1398
1418
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00006-2
Chen, Baoline
Zadrozny, Peter A.
oai:RePEc:eee:dyncon:v:33:y:2009:i:7:p:1379-13972014-12-11RePEc:eee:dyncon
article
Investor heterogeneity, asset pricing and volatility dynamics
We provide an explicit characterization of the equilibrium when investors have heterogeneous risk preferences. Given market completeness, investors can achieve full risk sharing. Thus, a representative agent can be constructed, though this agent's risk aversion changes over time as the relative wealths of the individual investors change. We show that volatility depends on the covariance of aggregate risk aversion and stock returns. We find that heterogeneity increases volatility, produces volatility clustering (ARCH effects) and "leverage"-like effects. Option prices exhibit implied volatility skews. There is predictability and we assess the magnitude of investors' hedging demands and trading volume. Further, diversity is beneficial to all agents and entails welfare gains that can be substantial.
Asset pricing Preference heterogeneity Volatility
7
2009
33
7
1379
1397
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00002-5
Weinbaum, David
oai:RePEc:eee:dyncon:v:34:y:2010:i:1:p:50-582014-12-11RePEc:eee:dyncon
article
Solving the incomplete market model with aggregate uncertainty using a perturbation method
We use a perturbation method to solve the incomplete markets model with aggregate uncertainty described in den Haan et al. [Computational suite of models with heterogeneous agents: incomplete markets and model uncertainty. Journal of Economic Dynamics & Control, this issue]. To apply that method, we use a "barrier method" to replace the original problem with occasionally binding inequality constraints by one with only equality constraints. We replace the structure with a continuum of agents by a setting in which a single infinitesimal agent faces prices generated by a representative-agent economy. We also solve a model variant with a large (but finite) number of agents. Our perturbation-based method is much simpler and faster than other methods.
Heterogeneous agents Occasionally binding inequality constraints Barrier method
1
2010
34
1
50
58
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00133-X
Kim, Sunghyun Henry
Kollmann, Robert
Kim, Jinill
oai:RePEc:eee:dyncon:v:34:y:2010:i:2:p:158-1782014-12-11RePEc:eee:dyncon
article
Dynamic investment and capital structure under manager-shareholder conflict
This paper investigates the interactions between the investment and financing decisions of a firm under manager-shareholder conflicts arising from asymmetric information. In particular, we extend the manager-shareholder conflict problem in a real options model by incorporating debt financing. We show that manager-shareholder conflicts over investment policy increase not only the investment and default triggers but also coupon payments, which lead to a decrease in the equity value. Moreover, given the presence of manager-shareholder conflicts, debt financing increases investment and decreases total social welfare. As a result, there is a trade-off between the efficiency of investment and total social welfare with debt financing. These results fit well with the findings of previous empirical work in this area.
Real options Debt financing Agency problem Asymmetric information
2
2010
34
2
158
178
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00157-2
Shibata, Takashi
Nishihara, Michi
oai:RePEc:eee:dyncon:v:34:y:2010:i:2:p:231-2452014-12-11RePEc:eee:dyncon
article
On the distributional consequences of epidemics
We develop a tractable general theory for the study of the economic and demographic impact of epidemics, notably its distributional consequences. To this end, we build up a three-period overlapping generations model where altruistic parents choose optimal health expenditures for their children and themselves. The survival probability of adults and children depends on such investments. Agents can be skilled or unskilled. In this paper, epidemics are modeled as one-period exogenous shocks to the adults' survival rates. We first show that such epidemics have permanent effects on the size of population and on the level of output. However, the income distribution is shown to be unaltered in the long-run. Second, we show that this distribution may be significantly altered in the medium-term: in particular, the proportion of the unskilled will necessarily increase at that term if orphans are too penalized in the access to education.
Epidemics Orphans Income distribution Endogenous survival Medium-term dynamics
2
2010
34
2
231
245
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00161-4
Boucekkine, Raouf
Laffargue, Jean-Pierre
oai:RePEc:eee:dyncon:v:34:y:2010:i:2:p:101-1202014-12-11RePEc:eee:dyncon
article
Optimal stalling when bargaining
This paper analyzes an alternating offer model of bargaining over the sale of an asset in a market, such as that for housing, in which another agent may come and compete for the right to strike a deal. The analysis allows the buyer and seller to have possibly differing views as to how likely such a competition is. Hence the buyer and the seller disagree about their respective bargaining powers. These views adjust to market realizations as the parties learn. It is shown that there exists a unique subgame perfect equilibrium which can be explicitly constructed: hence, conditional on market conditions, equilibrium prices and optimal stall lengths (that is, delay) can be found. Bargaining delay can only occur if there is optimism (not pessimism) and only if the parties are open to learning as time elapses. This delay can occur even for very small levels of optimism and the delay can be for economically significant periods.
Optimism Bargaining delay Asset sales House sales Bargaining power
2
2010
34
2
101
120
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00114-6
Thanassoulis, John
oai:RePEc:eee:dyncon:v:33:y:2009:i:9:p:1631-16382014-12-11RePEc:eee:dyncon
article
Macroeconomic (in)stability under real interest rate targeting
We show that in a one-sector monetary endogenous growth model under real interest rate targeting, the local stability properties of the economy's balanced growth path depend crucially on the exact formulation of the cash-in-advance constraint and the degree of productive externalities. In particular, when a positive fraction (including 100%) of gross investment is subject to the liquidity constraint, the model exhibits indeterminacy and sunspots if and only if the equilibrium wage-hours locus is positively sloped and steeper than the labor supply curve. On the other hand, when real money balances are required only for the household's consumption purchases, the economy always displays saddle-path stability and equilibrium uniqueness, regardless of the strength of productive externalities.
Real interest rate targeting Endogenous growth Cash-in-advance constraint Indeterminacy
9
2009
33
9
1631
1638
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00050-5
Chin, Chi-Ting
Guo, Jang-Ting
Lai, Ching-Chong
oai:RePEc:eee:dyncon:v:34:y:2010:i:1:p:79-992014-12-11RePEc:eee:dyncon
article
Assessing the accuracy of the aggregate law of motion in models with heterogeneous agents
This paper shows that the R2 and the standard error have fatal flaws and are inadequate accuracy tests. Using data from a Krusell-Smith economy, I show that approximations for the law of motion of aggregate capital, for which the true standard deviation of aggregate capital is up to 14% (119%) higher than the implied value and which are thus clearly inaccurate, can have an R2 as high as 0.9999 (0.99). Key in generating a more powerful test is that predictions of the aggregate law of motion are not updated with the aggregated simulated individual data.
Numerical solutions Simulations Approximations
1
2010
34
1
79
99
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00135-3
Den Haan, Wouter J.
oai:RePEc:eee:dyncon:v:34:y:2010:i:3:p:417-4362014-12-11RePEc:eee:dyncon
article
Modeling structural breaks in economic relationships using large shocks
This paper introduces a new model of structural breaks in the coefficients of economic relationships which allows them to be driven by large past economic shocks. The breaks generated by these shocks can be taken to reflect stochastic changes in agents' decisions or beliefs triggered by extraordinary economic events. Our model specifies that both the timing and size of breaks are stochastic. The last property of it enables us to investigate qualitative effects that large shocks can have on economic relationships. As an empirical application of our model, the paper investigates the stability the oil-economy relationship since the early sixties. From the six large oil-shocks identified by our data, the paper shows that only the first oil shock at the end of 1973 has caused a major long term adverse effect on economic activity. All the large oil price shocks that have happened since then did not have any significant negative effects on the slope of the oil-economy relationship.
Structural breaks State space model Oil shocks
3
2010
34
3
417
436
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00181-X
Kapetanios, G.
Tzavalis, E.
oai:RePEc:eee:dyncon:v:34:y:2010:i:3:p:503-5212014-12-11RePEc:eee:dyncon
article
Markov-perfect capital and labor taxes
This paper analyzes the Markov-perfect equilibrium of an economy were a benevolent government that lacks the ability to commit to future policy choices, uses taxes on capital and labor income to finance the provision of a public good. The main finding is that the government taxes capital and subsidizes labor so that only the dynamic inefficiency of future capital taxes remains. If agents' preference for the public good is sufficiently high, then capital is confiscated. Setting bounds on taxes alleviates the dynamic inefficiency inherent in capital taxation, but some implementations carry a high welfare cost. Allowing for endogenous capital utilization makes the current capital tax distortionary and implies capital and labor tax rates that are relatively close to those measured for the U.S. economy.
Time-consistency Markov-perfect equilibrium Optimal taxation Capital tax
3
2010
34
3
503
521
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00194-8
Martin, Fernando M.
oai:RePEc:eee:dyncon:v:34:y:2010:i:2:p:191-2062014-12-11RePEc:eee:dyncon
article
Does tax competition really promote growth?
This paper considers the relationship between tax competition and growth in an endogenous growth model where there are stochastic shocks to productivity, and capital taxes fund a public good which may be for final consumption or an infrastructure input. Absent stochastic shocks, decentralized tax setting (two or more jurisdictions) maximizes the rate of growth, as the constant returns to scale present with endogenous growth implies "extreme" tax competition. Stochastic shocks imply that households face a portfolio choice problem, which dampens down tax competition and may raise taxes above the centralized level. Growth can be lower with decentralization. Our results also predict a negative relationship between output volatility and growth with decentralization.
Tax competition Uncertainty Stochastic growth
2
2010
34
2
191
206
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00159-6
Koethenbuerger, Marko
Lockwood, Ben
oai:RePEc:eee:dyncon:v:34:y:2010:i:3:p:522-5412014-12-11RePEc:eee:dyncon
article
Ability-heterogeneity, entrepreneurship, and economic growth
This paper develops an endogenous growth model of occupational choice with overlapping generations heterogeneous in entrepreneurial ability. While an increase in the number of entrepreneurs creates a growth-enhancing variety effect, the reduced overall quality of entrepreneurial ability retards growth. As a result, the number of entrepreneurs and output growth need not be positively related, in response to changes in the ability distribution. While cheaper financial operation and higher manufacturing productivity are both growth-enhancing, they have different effects on equilibrium factor prices and equilibrium financial markups. Additionally, the long-run growth consequences of subsidies to entrepreneurship and credit-market imperfections are studied.
Occupational choice Entrepreneurial ability Distribution and growth
3
2010
34
3
522
541
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00195-X
Jiang, Neville
Wang, Ping
Wu, Haibin
oai:RePEc:eee:dyncon:v:34:y:2010:i:1:p:59-682014-12-11RePEc:eee:dyncon
article
Solving the incomplete markets model with aggregate uncertainty using parameterized cross-sectional distributions
This note describes how the incomplete markets model with aggregate uncertainty in Den Haan et al. [Comparison of solutions to the incomplete markets model with aggregate uncertainty. Journal of Economic Dynamics and Control, this issue] is solved using standard quadrature and projection methods. This is made possible by linking the aggregate state variables to a parameterized density that describes the cross-sectional distribution. A simulation procedure is used to find the best shape of the density within the class of approximating densities considered. This note compares several simulation procedures in which there is--as in the model--no cross-sectional sampling variation.
Numerical solutions Projection methods Simulations
1
2010
34
1
59
68
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00144-4
Algan, Yann
Allais, Olivier
Den Haan, Wouter J.
oai:RePEc:eee:dyncon:v:34:y:2010:i:1:p:69-782014-12-11RePEc:eee:dyncon
article
Solving the incomplete markets model with aggregate uncertainty using explicit aggregation
We propose a method to solve models with heterogeneous agents and aggregate uncertainty. The law of motion describing aggregate behavior is obtained by explicitly aggregating the individual policy rule. The algorithm is simpler and faster than existing algorithms that rely on parameterization of the cross-sectional distribution and/or a computationally intensive simulation step. Explicit aggregation establishes a link between the individual policy rule and the set of necessary aggregate state variables, an insight that can be helpful in determining what state variables to include in other algorithms as well.
Numerical solutions Projection methods
1
2010
34
1
69
78
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00134-1
Den Haan, Wouter J.
Rendahl, Pontus
oai:RePEc:eee:dyncon:v:33:y:2009:i:11:p:1837-18572014-12-11RePEc:eee:dyncon
article
Implied recovery
In the absence of forward-looking models for recovery rates, market participants tend to use exogenously assumed constant recovery rates in pricing models. We develop a flexible jump-to-default model that uses observables: the stock price and stock volatility in conjunction with credit spreads to identify implied, endogenous, dynamic functions of the recovery rate and default probability. The model in this paper is parsimonious and requires the calibration of only three parameters, enabling the identification of the risk-neutral term structures of forward default probabilities and recovery rates. Empirical application of the model shows that it is consistent with stylized features of recovery rates in the literature. The model is flexible, i.e. it may be used with different state variables, alternate recovery functional forms, and calibrated to multiple debt tranches of the same issuer. The model is robust, i.e. evidences parameter stability over time, is stable to changes in inputs, and provides similar recovery term structures for different functional specifications. Given that the model is easy to understand and calibrate, it may be used to further the development of credit derivatives indexed to recovery rates, such as recovery swaps and digital default swaps, as well as provide recovery rate inputs for the implementation of Basel II.
Credit default swaps Recovery Default probability Reduced form
11
2009
33
11
1837
1857
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00102-X
Das, Sanjiv R.
Hanouna, Paul
oai:RePEc:eee:dyncon:v:34:y:2010:i:1:p:28-352014-12-11RePEc:eee:dyncon
article
Solving the incomplete markets model with aggregate uncertainty by backward induction
This paper describes a method to solve models with a continuum of agents, incomplete markets and aggregate uncertainty. I use backward induction on a finite grid of points in the aggregate state space. The aggregate state includes a small number of statistics (moments) of the cross-sectional distribution of capital. For any given set of moments, agents use a specific cross-sectional distribution, called "proxy distribution", to compute the equilibrium. Information from the steady state distribution as well as from simulations can be used to chose a suitable proxy distribution.
Heterogeneous agents Backward induction
1
2010
34
1
28
35
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00130-4
Reiter, Michael
oai:RePEc:eee:dyncon:v:33:y:2009:i:11:p:1929-19442014-12-11RePEc:eee:dyncon
article
Behavioural heterogeneity and shift-contagion: Evidence from the Asian crisis
In this paper, we propose an empirical model based on the heterogeneous agents literature. Price changes are induced by fundamental, technical, and international factors. The model is estimated for Hong Kong and Thailand surrounding the Asian crisis. We find that the three sources are relevant and that their relative price impact fluctuates conditional on price impact in the previous period. Results imply that the crisis is triggered in Thailand due to an increased focus on the fundamental price, followed by an increase in chartism and finally aggravated by a focus on foreign developments. Furthermore, the crisis deepens in Hong Kong because of increased attention for foreign markets.
Heterogeneous expectations Contagion Asian crisis Dynamic models
11
2009
33
11
1929
1944
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00123-7
de Jong, Eelke
Verschoor, Willem F.C.
Zwinkels, Remco C.J.
oai:RePEc:eee:dyncon:v:33:y:2009:i:8:p:1555-15762014-12-11RePEc:eee:dyncon
article
Preferences with frames: A new utility specification that allows for the framing of risks
Experiments on decision-making show that, when people evaluate risk, they often engage in "narrow framing": that is, in contrast to the prediction of traditional utility functions defined over wealth or consumption, they often evaluate risks in isolation, separately from other risks they are already facing. While narrow framing has many potential real-world applications, there are almost no tractable preference specifications that incorporate it into the standard framework used by economists. In this paper, we propose such a specification and demonstrate its tractability in both portfolio choice and equilibrium settings.
Framing Stock market participation Diversification Equity premium
8
2009
33
8
1555
1576
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00044-X
Barberis, Nicholas
Huang, Ming
oai:RePEc:eee:dyncon:v:24:y:2000:i:2:p:165-1882014-03-21RePEc:eee:dyncon
article
Complementarity problems in GAMS and the PATH solver
2
2000
24
2
165
188
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00092-X
Ferris, Michael C.
Munson, Todd S.
oai:RePEc:eee:dyncon:v:23:y:1999:i:8:p:1099-11312014-03-21RePEc:eee:dyncon
article
Receding horizon control of jump linear systems and a macroeconomic policy problem
8
1999
23
8
1099
1131
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00058-X
do Val, Joao B. R.
Basar, Tamer
oai:RePEc:eee:dyncon:v:23:y:1999:i:8:p:1207-12242014-03-21RePEc:eee:dyncon
article
Competitive equilibrium and public investment plans
8
1999
23
8
1207
1224
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00061-X
Glomm, Gerhard
Ravikumar, B.
oai:RePEc:eee:dyncon:v:23:y:1999:i:9-10:p:1425-14582014-03-21RePEc:eee:dyncon
article
Flat tax reform: A quantitative exploration
9-10
1999
23
9
1425
1458
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00079-7
Ventura, Gustavo
oai:RePEc:eee:dyncon:v:23:y:1999:i:5-6:p:699-7262014-03-21RePEc:eee:dyncon
article
Education, economic growth, and brain drain
5-6
1999
23
4
699
726
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00040-2
Wong, Kar-yiu
Yip, Chong Kee
oai:RePEc:eee:dyncon:v:33:y:2009:i:3:p:525-5372015-09-25RePEc:eee:dyncon
article
The impact of heterogeneous trading rules on the limit order book and order flows
In this paper we develop a model of an order-driven market where traders set bids and asks and post market or limit orders according to exogenously fixed rules. Agents are assumed to have three components of the expectation of future asset returns, namely fundamentalist, chartist and noise trader. Furthermore agents differ in the characteristics describing these components, such as time horizon, risk aversion and the weights given to the various components. The model developed here extends a great deal of earlier literature in that the order submissions of agents are determined by utility maximisation, rather than the mechanical unit order size that is commonly assumed. In this way the order flow is better related to the ongoing evolution of the market. For the given market structure we analyze the impact of the three components of the trading strategies on the statistical properties of prices and order flows and observe that it is the chartist strategy that is mainly responsible of the fat tails and clustering in the artificial price data generated by the model. The paper provides further evidence that large price changes are likely to be generated by the presence of large gaps in the book.
Optimal fiscal policy; Adaptive learning;
3
2009
33
525
537
C6
D4
G1
http://www.sciencedirect.com/science/article/pii/S0165188908001437
Chiarella, Carl
Iori, Giulia
oai:RePEc:eee:dyncon:v:54:y:2015:i:c:p:86-1102015-04-21RePEc:eee:dyncon
article
Complete subset regressions with large-dimensional sets of predictors
We analyze the complete subset regression (CSR) approach of Elliott et al. (2013) in situations with many possible predictor variables. The CSR approach has the computational advantage that it can be applied even when the number of predictors exceeds the sample size. Theoretical results establish that the CSR approach achieves variance reduction and Monte Carlo simulations show that it offers a favorable bias–variance trade-off in the presence of many weak predictor variables. Empirical applications to out-of-sample predictability of U.S. unemployment, GDP growth and inflation show that CSR combinations produce more accurate point forecasts than a dynamic factor approach or univariate regressions that do not exploit the information in the cross-section of predictors.
Complete subset regression; Macroeconomic forecasts; Forecast combination; Factor models;
C
2015
54
86
110
C22
C53
E37
http://www.sciencedirect.com/science/article/pii/S0165188915000524
Elliott, Graham
Gargano, Antonio
Timmermann, Allan
oai:RePEc:eee:dyncon:v:54:y:2015:i:c:p:37-582015-04-21RePEc:eee:dyncon
article
Fiscal cost of demographic transition in Japan
This paper quantifies the fiscal cost of demographic transition that Japan is projected to experience over the next several decades, in a life-cycle model with endogenous saving, consumption, and labor supply in both intensive and extensive margins. Retirement waves of baby-boom generations, combined with a rise in longevity and low fertility rates, raise the old-age dependency ratio to 85% by 2050, the highest among major developed countries, and generate a significant budget imbalance, as the government faces rising costs of public pension and health and long-term care insurance. Preserving the current level of the transfers will require a major increase in taxation. Using consumption taxes to balance the government budget, the tax rate reaches the maximal value of 48% in late 2070s. A pension reform to reduce benefits by 20% results in a peak tax rate of 37%, which can be reduced further to 28% if the retirement age is also gradually raised by 5 years.
Social security reform; Demographic transition; Public pension program; Health insurance; Long-term care insurance; Japanese economy;
C
2015
54
37
58
E2
E6
H3
J1
http://www.sciencedirect.com/science/article/pii/S0165188915000342
Kitao, Sagiri
oai:RePEc:eee:dyncon:v:54:y:2015:i:c:p:17-362015-04-21RePEc:eee:dyncon
article
Solving and estimating indeterminate DSGE models
We propose a method for solving and estimating linear rational expectations models that exhibit indeterminacy and we provide step-by-step guidelines for implementing this method in the Matlab-based packages Dynare and Gensys. Our method redefines a subset of expectational errors as new fundamentals. This redefinition allows us to treat indeterminate models as determinate and to apply standard solution algorithms. We prove that our method is equivalent to the solution method proposed by Lubik and Schorfheide (2003, 2004), and using the New-Keynesian model described in Lubik and Schorfheide (2004), we demonstrate how to apply our theoretical results with a practical exercise.
Indeterminacy; Bayesian methods; Dynare;
C
2015
54
17
36
C19
C51
C63
http://www.sciencedirect.com/science/article/pii/S0165188915000317
Farmer, Roger E.A.
Khramov, Vadim
Nicolò, Giovanni
oai:RePEc:eee:dyncon:v:54:y:2015:i:c:p:74-852015-04-21RePEc:eee:dyncon
article
Convergence of optimal harvesting policies to a normal forest
This paper extends the forestry maximum principle of Heaps (1984) to allow the benefits of harvesting to be the utility of the volume of the wood harvested as in Mitra and Wan (1985, 1986). Unlike those authors, however, time is treated as a continuous rather than as a discrete variable. Existence of an optimal harvesting policy is established. Then necessary conditions are derived for the extended model which are also sufficient. The conditions are used to show that under certain boundedness conditions, sequences of optimal harvesting policies contain subsequences which converge pointwise a.e. and in net present value to an optimal harvesting policy. This result is then used to show that any optimal logging policy must converge in harvesting age to a constant rotation period given by modified Faustmann formula. The associated age class distribution converges to a normal forest.
Optimal harvesting; Multiple age classes; Convergence; Normal forest;
C
2015
54
74
85
Q23
C61
http://www.sciencedirect.com/science/article/pii/S0165188915000354
Heaps, Terry
oai:RePEc:eee:dyncon:v:54:y:2015:i:c:p:59-732015-04-21RePEc:eee:dyncon
article
Insurance and climate-driven extreme events
We investigate how insurance affects agents’ decisions when being faced by endogenous, climate-driven extreme events. This is not only important in order to understand how the possibility of insurance augments mitigation and saving decisions, but it also improves our understanding of how insurance should be provided. Since there are no studies as of now that rely on such an integrated approach, we extend the literature along two lines. Firstly, we develop a neoclassical growth framework with endogenous extreme events and an insurance sector. Secondly, we introduce a simulation method that allows us to explicitly take these extreme events into account and which yields additional numerical insights. In doing so we can fully characterize and quantify the impact of different insurance policies for mitigation and economic growth decisions.
Economic growth; Climate change; Insurance; Integrated assessment; Extreme events; Catastrophes;
C
2015
54
59
73
Q5
O1
http://www.sciencedirect.com/science/article/pii/S0165188915000366
Müller-Fürstenberger, Georg
Schumacher, Ingmar
oai:RePEc:eee:dyncon:v:54:y:2015:i:c:p:1-162015-04-21RePEc:eee:dyncon
article
Abatement, R&D and growth with a pollution ceiling
The consequences of the 2°C climate target and the implicitly imposed ceiling on CO2 have been analyzed in several studies. We use an endogenous growth model with a ceiling and an abatement option to study the effect of the ceiling on the allocation of limited funds for R&D, abatement and capital accumulation. It is found that the advantagenousness of abatement rises with the cost advantage of fossil fuel versus backstop. If the cost advantage is sufficiently large at some point in time it outweighs the costs of abatement and the gains of R&D and capital accumulation. The reallocation of production towards abatement may cause an increase or decrease in long-run consumption. In the latter case, abatement allows an intertemporal consumption trade-off which may even justify the disregard of everlasting growth. In case of stock dependent fossil fuel costs, an abatement induced speed-up of technology development may cause an increase in fossil fuel stock left in situ.
Climate change; Research and development; Abatement; Endogenous growth; Fossil fuel; Renewable resource;
C
2015
54
1
16
O13
O44
Q54
http://www.sciencedirect.com/science/article/pii/S0165188915000330
Kollenbach, Gilbert
oai:RePEc:eee:dyncon:v:27:y:2003:i:11:p:2035-20572013-06-07RePEc:eee:dyncon
article
Mitigation of the Lucas critique with stochastic control methods
Lucas (In: Brunner, K., Meltzer, A.H. (Eds.), The Phillips Curve and the Labor Markets, Supplementary Series to the Journal of Monetary Economics, 1976, pp. 19–46) pointed out, that when optimization is performed on a deterministic macro model, the resulting policy may not reflect the true optimal solution. Private agents may react to announced policies and consequently model parameters will start to drift. The aim of this paper is to develop a methodology for deriving an optimal policy in the presence of rational expectations and parameter drift. This drift is captured by a stochastic optimization framework with time-varying parameters. The resulting optimal policy is capable of tracking changes in the parameters due to policy changes. A numerical example illustrates how the methodology provides a way to mitigate the effects of the Lucas critique.
Macroeconomics; Rational expectations; Stochastic optimization; Numerical experiments;
11
2003
27
2035
2057
C63
E61
http://www.sciencedirect.com/science/article/pii/S016518890200115X
Amman, Hans M.
Kendrick, David A.
oai:RePEc:eee:dyncon:v:37:y:2013:i:7:p:1384-14002013-06-07RePEc:eee:dyncon
article
Contagion and risk-sharing on the inter-bank market
Increasing inter-bank lending has an ambiguous impact on financial stability. Using a computational model with endogenous bank behavior and interest rates we identify the conditions under which inter-bank lending promotes stability through risk sharing or provides a channel through which failures may spread. In response to large economy-wide shocks, more inter-bank lending relationships worsen systemic events. For smaller shocks the opposite effect is observed. As such no inter-bank market structure maximizes stability under all conditions. In contrast, deposit insurance costs are always reduced under greater numbers of inter-bank lending relationships. A range of regulations are considered to increase system stability.
Systemic risk; Inter-bank lending; Contagion; Regulation; Network;
7
2013
37
1384
1400
G21
C63
http://www.sciencedirect.com/science/article/pii/S016518891300064X
Ladley, Daniel
oai:RePEc:eee:dyncon:v:37:y:2013:i:6:p:1168-11812013-06-07RePEc:eee:dyncon
article
Growth, agglomeration, and urban congestion
We consider a microfounded urban growth model with two regions and a mass of mobile workers to study interactions among growth, agglomeration, and urban congestion. Unlike previous research in the urban growth literature, we formulate the model as a one-shot game and take an evolutionary game-theoretic approach for stability analysis. Our approach enables us to analyze stability of nonstationary equilibria in which populations of each region are not constant over time. We show that if both the expenditure share for housing and inter-regional transport cost are small, a stable stationary equilibrium does not exist. Moreover, in such a case, we show that there can exist a stable nonstationary equilibrium in which mobile workers agglomerate in one region at first but some of them migrate to the other region later. We argue that such a nonstationary location pattern is related to return migration.
Growth; Agglomeration; Urban congestion; Economic geography; Return migration; Population game; Evolutionary game theory;
6
2013
37
1168
1181
C73
O18
R11
R12
R23
http://www.sciencedirect.com/science/article/pii/S0165188913000237
Fujishima, Shota
oai:RePEc:eee:dyncon:v:37:y:2013:i:7:p:1342-13612013-06-07RePEc:eee:dyncon
article
Practical policy iteration: Generic methods for obtaining rapid and tight bounds for Bermudan exotic derivatives using Monte Carlo simulation
We introduce a set of improvements which allow the calculation of very tight lower bounds for Bermudan derivatives using Monte Carlo simulation. These tight lower bounds can be computed quickly, and with minimal hand-crafting. Our focus is on accelerating policy iteration to the point where it can be used in similar computation times to the basic least-squares approach, but in doing so introduce a number of improvements which can be applied to both the least-squares approach and the calculation of upper bounds using the Andersen–Broadie method. The enhancements to the least-squares method improve both accuracy and efficiency.
Bermudan option; LIBOR market model; Early exercise; Monte Carlo;
7
2013
37
1342
1361
G13
http://www.sciencedirect.com/science/article/pii/S0165188913000493
Beveridge, Christopher
Joshi, Mark
Tang, Robert
oai:RePEc:eee:dyncon:v:27:y:2003:i:11:p:2095-21142013-06-07RePEc:eee:dyncon
article
Small dimension PDE for discrete Asian options
This paper presents an efficient method for pricing discrete Asian options in presence of smile and non-proportional dividends. Using an homogeneity property, we show how to reduce an n0 dimensional problem to a one- or two-dimensional one. We examine different numerical specifications of our dimension reduced PDE using a Crank–Nicholson method (interpolation method, grid boundaries, time and space steps) as well as the extension to the case of non-proportional discrete dividends, using a jump condition. We benchmark our results with Quasi Monte-Carlo simulation and a multi-dimensional PDE
Discrete Asian Option; Homogeneity; PDEs; Crank–Nicholson; Non-proportional dividends; Smile;
11
2003
27
2095
2114
G12
G13
http://www.sciencedirect.com/science/article/pii/S0165188902001173
Benhamou, Eric
Duguet, Alexandre
oai:RePEc:eee:dyncon:v:37:y:2013:i:6:p:1195-12122013-06-07RePEc:eee:dyncon
article
Zipf's law and maximum sustainable growth
Zipf's law states that the number of firms with size greater than S is inversely proportional to S. Most explanations start with Gibrat's rule of proportional growth but require additional constraints. We show that Gibrat's rule, at all firm levels, yields Zipf's law under a balance condition between the effective growth rate of incumbent firms (which includes their possible demise) and the growth rate of investments in entrant firms. Under the additional assumption that firms do not consume more resources than available, we show that Zipf's law is the signature that firms grow at the maximum reachable long-term rate.
Firm growth; Gibrat's law; Zipf's law;
6
2013
37
1195
1212
G11
G12
http://www.sciencedirect.com/science/article/pii/S0165188913000341
Malevergne, Y.
Saichev, A.
Sornette, D.
oai:RePEc:eee:dyncon:v:27:y:2003:i:11:p:2243-22652013-06-07RePEc:eee:dyncon
article
Nonlinear mean reversion in the term structure of interest rates
The expectations hypothesis implies that the yield curve provides information on the future change in the short-term interest rate. However, transaction costs exist in the financial market, which prevent investors from realizing the arbitrage opportunity, when the arbitrage does not fully cover the transaction costs. The purpose of this paper is to assess the effect of transaction costs on the predictability of the term structure by using the threshold vector error correction model, which allows for the nonlinear adjustment to the long-run equilibrium relationship. A significant amount of threshold effect is found, and the adjustment coefficients are regime-dependent. The empirical result supports the nonlinear mean reversion in the term structure of interest rates.
Expectations hypothesis; Transaction costs; Threshold cointegration;
11
2003
27
2243
2265
C32
E43
http://www.sciencedirect.com/science/article/pii/S0165188902001240
Seo, Byeongseon
oai:RePEc:eee:dyncon:v:27:y:2003:i:11:p:2151-21702013-06-07RePEc:eee:dyncon
article
Inferring strategies from observed actions: a nonparametric, binary tree classification approach
This paper introduces a non-parametric binary classification tree approach to inferring unobserved strategies from the observed actions of economic agents. The strategies are in the form of possibly nested if–then statements. We apply our approach to experimental data from the repeated ultimatum game, which was conducted in four different countries by Roth et al. (Am. Econ. Rev. 81 (1991) 1068). We find that strategy inference is consistent with existing inference, provides new explanations for subject behavior, and provides new empirically based hypotheses regarding ultimatum game strategies. We conclude that strategy inference is potentially useful as a complementary method of statistical inference in applied research.
Binary tree; Classifier; Strategy; Bargaining; Non-parametric; Resampling; Experimental economics;
11
2003
27
2151
2170
http://www.sciencedirect.com/science/article/pii/S0165188902001197
Engle-Warnick, Jim
oai:RePEc:eee:dyncon:v:27:y:2003:i:11:p:2171-21932013-06-07RePEc:eee:dyncon
article
Gaining the competitive edge using internal and external spillovers: a dynamic analysis
This paper studies the evolution of two clusters of firms competing on a common market. Firms exit and enter a cluster based on the perceived chances for profits inside and outside the cluster. Information about profits are diffused by direct communication between firms. Internal and external spillover effects reduce the overall costs of firms in the clusters depending on the number of firms in the own and the competing cluster. A discrete time deterministic dynamical system describing the evolution of cluster sizes is derived. An analysis of the long run attractors of the system and their basins of attraction is used to compare the effects of advantages of a cluster with respect to the size of internal and external spillover effects, respectively. Furthermore, the implications of slow and fast exit and entry behavior of firms for the long run survival and the size of the clusters are studied.
Spillover effects; Evolutionary dynamics; Equilibrium selection; Basins of attraction; Critical curves;
11
2003
27
2171
2193
D62
D83
L52
http://www.sciencedirect.com/science/article/pii/S0165188902001203
Bischi, G.-I.
Dawid, H.
Kopel, M.
oai:RePEc:eee:dyncon:v:27:y:2003:i:11:p:1941-19592013-06-07RePEc:eee:dyncon
article
Global dynamics in macroeconomics: an overlapping generations example
In this paper, we present some techniques used in the dynamical systems literature that let us characterize the stable and unstable manifolds of a given dynamical system. As a result, we can study how an economy behaves as it moves far away from the steady state in an environment where economic agents do not face uncertainty. The underlying idea behind these methods is to compute the manifolds nonlocally by exploiting an invariance condition that analytically describes these manifolds. In order to illustrate these techniques, we present a general equilibrium model under two different policy regimes demonstrating that local and global dynamics of an economic system can be substantially different.
11
2003
27
1941
1959
http://www.sciencedirect.com/science/article/pii/S0165188902001112
Gomis-Porqueras, Pere
Haro, Alex
oai:RePEc:eee:dyncon:v:27:y:2003:i:11:p:2115-21492013-06-07RePEc:eee:dyncon
article
Local trade networks and spatially persistent unemployment
This paper studies the effects of local trade networks on the spatial distribution of employment in a model that allows for effective demand externalities as well as home bias. It is shown that, if labor can be hired in continuous quantities, then the long run spatial distribution of employment is uniform, and independent of any trade network topology. When labor has binary support, however, local trade networks are found to generate spatial unemployment clusters which can persist indefinitely.
Trade; Networks; Unemployment; Local interactions; Cellular automata;
11
2003
27
2115
2149
http://www.sciencedirect.com/science/article/pii/S0165188902001185
Oomes, Nienke
oai:RePEc:eee:dyncon:v:37:y:2013:i:7:p:1322-13412013-06-07RePEc:eee:dyncon
article
Avoiding an ecological regime shift is sound economic policy
We extend the shallow lake model by adding the capital stock of an industry. A government can mitigate the effects of pollution arising from industrial activities by imposing the requirement to abate emissions. Within this framework two scenarios are examined: in the social optimal benchmark, the social planner optimally allocates investment. In the competitive equilibrium, market forces determine the investment in capital, but the government can still abate emissions. We find that irreversible environmental regime shifts are avoided in the competitive equilibrium by means of a static level of abatement when it is socially optimal to do so.
Optimal abatement; Capital stock; Irreversibility; Regime shift;
7
2013
37
1322
1341
C61
Q20
Q50
http://www.sciencedirect.com/science/article/pii/S0165188913000481
Heijnen, P.
Wagener, F.O.O.
oai:RePEc:eee:dyncon:v:37:y:2013:i:7:p:1362-13832013-06-07RePEc:eee:dyncon
article
Exchange rate expectations of chartists and fundamentalists
This paper provides novel evidence on exchange rate expectations of both chartists and fundamentalists separately. These groups indeed form expectations differently. Chartists change their expectations more often; however, all professionals' expectations vary considerably as they generally follow strong exchange rate trends. In line with non-linear exchange rate-modeling, professionals expect mean reversion only if exchange rates deviate strongly from PPP. Chartists survive in currency markets since they forecast just as accurately as fundamentalists. Unexpectedly from an efficient market viewpoint, chartists even outperform fundamentalists at short horizons. Overall, these findings clearly support the chartist–fundamentalist approach.
F31; G15; D84; Exchange rate formation; Expectation formation; Heterogeneous agent models;
7
2013
37
1362
1383
http://www.sciencedirect.com/science/article/pii/S0165188913000614
Dick, Christian D.
Menkhoff, Lukas
oai:RePEc:eee:dyncon:v:11:y:1987:i:3:p:313-3292012-12-25RePEc:eee:dyncon
article
Behavior of the firm in a market for heterogeneous labor
3
1987
11
9
313
329
http://www.sciencedirect.com/science/article/pii/S0165-1889(87)80010-6
Vroman, Susan B.
oai:RePEc:eee:dyncon:v:27:y:2003:i:4:p:701-7162012-12-25RePEc:eee:dyncon
article
A DNS-curve in a two-state capital accumulation model: a numerical analysis
4
2003
27
2
701
716
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00070-7
Haunschmied, Josef L.
Kort, Peter M.
Hartl, Richard F.
Feichtinger, Gustav
oai:RePEc:eee:dyncon:v:31:y:2007:i:12:p:3965-39852012-12-25RePEc:eee:dyncon
article
Optimal pest control in agriculture
12
2007
31
12
3965
3985
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00052-8
Christiaans, Thomas
Eichner, Thomas
Pethig, Rudiger
oai:RePEc:eee:dyncon:v:31:y:2007:i:7:p:2317-23492012-12-25RePEc:eee:dyncon
article
A general framework for evaluating executive stock options
7
2007
31
7
2317
2349
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00146-1
Sircar, Ronnie
Xiong, Wei
oai:RePEc:eee:dyncon:v:3:y:1981:i:1:p:97-1182012-12-25RePEc:eee:dyncon
article
Choice of projects and their starting dates An extension of Pontryagin's maximum principle to a case which allows choice among different possible evolution equations
1
1981
3
11
97
118
http://www.sciencedirect.com/science/article/pii/0165-1889(81)90006-3
Michel, Philippe
oai:RePEc:eee:dyncon:v:21:y:1997:i:1:p:23-732012-12-25RePEc:eee:dyncon
article
The empirics of growth and convergence: A selective review
1
1997
21
1
23
73
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00925-6
de la Fuente, Angel
oai:RePEc:eee:dyncon:v:31:y:2007:i:2:p:531-5552012-12-25RePEc:eee:dyncon
article
Asymmetric outcome in a symmetric dynamic duopoly
2
2007
31
2
531
555
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00023-6
Joshi, Sumit
oai:RePEc:eee:dyncon:v:32:y:2008:i:11:p:3520-35372012-12-25RePEc:eee:dyncon
article
A moving boundary approach to American option pricing
This paper describes a method to solve the free-boundary problem that arises in the pricing of American options. Most numerical methods for American option pricing exploit the representation of the option price as the expected pay-off under the risk-neutral measure and calculate the price for a given time to expiration and stock price. They do not solve the related free-boundary problem explicitly. The advantage of solving the free-boundary problem is that it provides the entire price function as well as the optimal exercise boundary explicitly. Our approach, which we term the Moving Boundary Approach, is based on using a boundary guess and the value associated with the guess to construct an improved boundary. It is also shown that on iteration, the sequence of boundaries converge monotonically to the optimal exercise boundary. Examples illustrating the convergence behavior as well as discussions providing insight into the method are also presented. Finally, we compare runtimes and speeds with other methods that solve the free-boundary problem and compute the optimal boundaries explicitly, like the front-fixing method, penalty method, method based on the integral representations and the method by Brennan and Schwartz [1977. The valuation of American put options. Journal of Finance 32 (2), 449-462].
American option pricing Stochastic control Hamilton-Jacobi-Bellman equation Free-boundary
11
2008
32
11
3520
3537
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00038-9
Muthuraman, Kumar
oai:RePEc:eee:dyncon:v:30:y:2006:i:5:p:741-7672012-12-25RePEc:eee:dyncon
article
Credit contagion and aggregate losses
5
2006
30
5
741
767
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00061-8
Giesecke, Kay
Weber, Stefan
oai:RePEc:eee:dyncon:v:17:y:1993:i:5-6:p:705-7212012-12-25RePEc:eee:dyncon
article
On the preservation of deterministic cycles when some agents perceive them to be random fluctuations
5-6
1993
17
705
721
http://www.sciencedirect.com/science/article/pii/0165-1889(93)90011-G
Evans, George W.
Honkapohja, Seppo
Sargent, Thomas J.
oai:RePEc:eee:dyncon:v:23:y:1999:i:8:p:1077-10982012-12-25RePEc:eee:dyncon
article
Efficient representation of state spaces for some dynamic models
8
1999
23
8
1077
1098
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00057-8
Gowrisankaran, Gautam
oai:RePEc:eee:dyncon:v:25:y:2001:i:12:p:1951-19712012-12-25RePEc:eee:dyncon
article
The optimal consumption function in a Brownian model of accumulation Part A: The consumption function as solution of a boundary value problem
12
2001
25
12
1951
1971
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00011-7
Foldes, Lucien
oai:RePEc:eee:dyncon:v:27:y:2003:i:11-12:p:2035-20572012-12-25RePEc:eee:dyncon
article
Mitigation of the Lucas critique with stochastic control methods
11-12
2003
27
9
2035
2057
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00115-X
Amman, Hans M.
Kendrick, David A.
oai:RePEc:eee:dyncon:v:28:y:2003:i:1:p:79-992012-12-25RePEc:eee:dyncon
article
Transfers to sustain dynamic core-theoretic cooperation in international stock pollutant control
1
2003
28
10
79
99
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00107-0
Germain, Marc
Toint, Philippe
Tulkens, Henry
de Zeeuw, Aart
oai:RePEc:eee:dyncon:v:23:y:1999:i:8:p:1155-11752012-12-25RePEc:eee:dyncon
article
Time-to-build and cycles
8
1999
23
8
1155
1175
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00052-9
Asea, Patrick K.
Zak, Paul J.
oai:RePEc:eee:dyncon:v:24:y:2000:i:2:p:227-2462012-12-25RePEc:eee:dyncon
article
Public services, increasing returns, and equilibrium dynamics
2
2000
24
2
227
246
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00088-8
Zhang, Junxi
oai:RePEc:eee:dyncon:v:11:y:1987:i:1:p:29-642012-12-25RePEc:eee:dyncon
article
Pensions, wage profiles, and retirement rules specific human capital approach
1
1987
11
3
29
64
http://www.sciencedirect.com/science/article/pii/0165-1889(87)90023-6
Chuma, Hiroyuki
oai:RePEc:eee:dyncon:v:31:y:2007:i:4:p:1326-13582012-12-25RePEc:eee:dyncon
article
The persistence of inflation in the United States
4
2007
31
4
1326
1358
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00097-2
Pivetta, Frederic
Reis, Ricardo
oai:RePEc:eee:dyncon:v:1:y:1979:i:1:p:1-22012-12-25RePEc:eee:dyncon
article
Introduction to the Journal of economic dynamics and control
1
1979
1
2
1
2
http://www.sciencedirect.com/science/article/pii/S0165-1889(79)80002-0
Kendrick, David
Tse, Edison
oai:RePEc:eee:dyncon:v:13:y:1989:i:3:p:401-4202012-12-25RePEc:eee:dyncon
article
Monetary and fiscal policies under two alternative types of rules
3
1989
13
7
401
420
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90030-4
Fukuda, Shin-ichi
oai:RePEc:eee:dyncon:v:27:y:2002:i:2:p:243-2692012-12-25RePEc:eee:dyncon
article
Optimal tax depreciation under a progressive tax system
2
2002
27
12
243
269
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00034-3
Wielhouwer, Jacco L.
Waegenaere, Anja De
Kort, Peter M.
oai:RePEc:eee:dyncon:v:32:y:2008:i:9:p:2745-27872012-12-25RePEc:eee:dyncon
article
Diffusion-induced instability and pattern formation in infinite horizon recursive optimal control
9
2008
32
9
2745
2787
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00231-X
Brock, William
Xepapadeas, Anastasios
oai:RePEc:eee:dyncon:v:32:y:2008:i:1:p:200-2342012-12-25RePEc:eee:dyncon
article
An empirical behavioral model of liquidity and volatility
1
2008
32
1
200
234
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00045-0
Mike, Szabolcs
Farmer, J. Doyne
oai:RePEc:eee:dyncon:v:1:y:1979:i:3:p:271-2822012-12-25RePEc:eee:dyncon
article
Economic policymaking in the United States: New procedures under Humphrey-Hawkins
3
1979
1
271
282
http://www.sciencedirect.com/science/article/pii/S0165-1889(79)90146-5
Roberts, Steven M.
oai:RePEc:eee:dyncon:v:36:y:2012:i:10:p:1498-15192012-12-25RePEc:eee:dyncon
article
The suspension of the gold standard as sustainable monetary policy
This paper models the gold standard as a state contingent commitment technology that is only feasible during peace. Monetary policy during war, when the gold convertibility rule is suspended, can still be credible, if the policymaker's plan is to resume the gold standard in the future. The DSGE model developed in this paper suggests that the resumption of the gold standard was a sustainable plan, which replaced the gold standard as a commitment technology and made monetary policy time consistent. Trigger strategies support the equilibrium: private agents retaliate if a policymaker defaults on its plan to resume the gold standard.
Time consistency; Monetary policy; Monetary regimes; Gold standard;
10
2012
36
1498
1519
C61
E31
E4
E5
N13
http://www.sciencedirect.com/science/article/pii/S0165188912000978
Newby, Elisa
oai:RePEc:eee:dyncon:v:28:y:2004:i:10:p:1925-19542012-12-25RePEc:eee:dyncon
article
Equilibrium stock return dynamics under alternative rules of learning about hidden states
10
2004
28
9
1925
1954
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00193-3
Brandt, M.W.Michael W.
Zeng, Qi
Zhang, Lu
oai:RePEc:eee:dyncon:v:23:y:1998:i:3:p:459-4622012-12-25RePEc:eee:dyncon
article
Balanced-growth-consistent recursive utility and heterogeneous agents
3
1998
23
11
459
462
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00005-0
Ben-Gad, Michael
oai:RePEc:eee:dyncon:v:22:y:1998:i:5:p:703-7282012-12-25RePEc:eee:dyncon
article
Diverging patterns with endogenous labor migration
5
1998
22
5
703
728
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00079-1
Reichlin, Pietro
Rustichini, Aldo
oai:RePEc:eee:dyncon:v:20:y:1996:i:1-3:p:385-4132012-12-25RePEc:eee:dyncon
article
Biconvergent stochastic dynamic programming, asymptotic impatience, and 'average' growth
1-3
1996
20
385
413
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00856-0
Streufert, Peter A.
oai:RePEc:eee:dyncon:v:1:y:1979:i:3:p:283-3002012-12-25RePEc:eee:dyncon
article
A newton-type method for the optimization and control of non-linear econometric models
3
1979
1
283
300
http://www.sciencedirect.com/science/article/pii/S0165-1889(79)90158-1
Rustem, B.
Zarrop, M.B.
oai:RePEc:eee:dyncon:v:14:y:1990:i:1:p:151-1732012-12-25RePEc:eee:dyncon
article
U.S. money demand instability A flexible least squares approach
1
1990
14
2
151
173
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90010-E
Tesfatsion, Leigh
Veitch, John M.
oai:RePEc:eee:dyncon:v:31:y:2007:i:2:p:361-3972012-12-25RePEc:eee:dyncon
article
A conditional extreme value volatility estimator based on high-frequency returns
2
2007
31
2
361
397
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00017-0
Bali, Turan G.
Weinbaum, David
oai:RePEc:eee:dyncon:v:29:y:2005:i:9:p:1495-15152012-12-25RePEc:eee:dyncon
article
Options with combined reset rights on strike and maturity
9
2005
29
9
1495
1515
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00110-1
Dai, Min
Kwok, Yue Kuen
oai:RePEc:eee:dyncon:v:23:y:1999:i:4:p:539-5632012-12-25RePEc:eee:dyncon
article
Inflationary financing of public investment and economic growth
4
1999
23
2
539
563
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00030-X
Cavalcanti Ferreira, Pedro
oai:RePEc:eee:dyncon:v:21:y:1997:i:10:p:1615-16252012-12-25RePEc:eee:dyncon
article
The value of information: The case of signal-dependent opportunity sets
10
1997
21
8
1615
1625
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00039-0
Sulganik, Eyal
Zilcha, Itzhak
oai:RePEc:eee:dyncon:v:28:y:2004:i:4:p:661-6902012-12-25RePEc:eee:dyncon
article
Indicator variables for optimal policy under asymmetric information
4
2004
28
1
661
690
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00039-3
Svensson, Lars E. O.
Woodford, Michael
oai:RePEc:eee:dyncon:v:28:y:2004:i:6:p:1013-10332012-12-25RePEc:eee:dyncon
article
A generalized impulse control model of cash management
6
2004
28
3
1013
1033
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00064-2
Bar-Ilan, Avner
Perry, David
Stadje, Wolfgang
oai:RePEc:eee:dyncon:v:31:y:2007:i:3:p:994-10142012-12-25RePEc:eee:dyncon
article
Investment under uncertainty--Does competition matter?
3
2007
31
3
994
1014
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00076-5
Odening, Martin
Mu[ss]hoff, Oliver
Hirschauer, Norbert
Balmann, Alfons
oai:RePEc:eee:dyncon:v:2:y:1980:i:1:p:79-912012-12-25RePEc:eee:dyncon
article
Dynamic optimal taxation, rational expectations and optimal control
1
1980
2
5
79
91
http://www.sciencedirect.com/science/article/pii/0165-1889(80)90052-4
Kydland, Finn E.
Prescott, Edward C.
oai:RePEc:eee:dyncon:v:30:y:2006:i:9-10:p:1671-16862012-12-25RePEc:eee:dyncon
article
The inflation aversion of the Bundesbank: A state space approach
9-10
2006
30
1671
1686
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00057-1
Kuzin, Vladimir
oai:RePEc:eee:dyncon:v:32:y:2008:i:6:p:2031-20602012-12-25RePEc:eee:dyncon
article
Endogenous fiscal policy and capital market transmissions in the presence of demographic shocks
Previous analyses of population aging mainly focused on the social security implications of the aging trend. This paper addresses aging in an open economy framework with two regions that have politically responsive fiscal policy regarding education finance. Demographic shocks start an economic growth process but results are sensitive to a critical parameter in the model that indicates return to education spending. Low values of this parameter are associated with less favorable economic outcomes. Hence, a policy implication emerges that enhancing the education system might pay off in terms of easing the negative growth and welfare consequences of expected demographic shocks.
6
2008
32
6
2031
2060
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00195-9
Tosun, Mehmet Serkan
oai:RePEc:eee:dyncon:v:13:y:1989:i:1:p:55-802012-12-25RePEc:eee:dyncon
article
Competitive dynamic advertising : A modification of the Case game
1
1989
13
1
55
80
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90011-0
Sorger, Gerhard
oai:RePEc:eee:dyncon:v:36:y:2012:i:9:p:1372-14012012-12-25RePEc:eee:dyncon
article
Hierarchical information and the rate of information diffusion
The rate of information diffusion and, consequently, price discovery are conditional not only upon the design of the market microstructure but also the informational structure. This paper presents a market microstructure model showing that an increasing number of information hierarchies among informed competitive traders leads to a slower information diffusion rate and informational inefficiency. The model illustrates that informed traders may prefer trading with each other rather than with noise traders in the presence of information hierarchies. The empirical investigation using transaction data on China's equity market supports that the information hierarchies decrease the speed of price discovery.
Information hierarchies; Information diffusion rate; Price discovery; Momentum;
9
2012
36
1372
1401
G10
G11
D43
D82
http://www.sciencedirect.com/science/article/pii/S0165188912000620
Xue, Yi
Gençay, Ramazan
oai:RePEc:eee:dyncon:v:26:y:2002:i:1:p:99-1162012-12-25RePEc:eee:dyncon
article
Depreciation rules and value invariance with extractive firms
1
2002
26
1
99
116
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00019-1
Hartwick, John M.
Karp, Larry
Long, Ngo Van
oai:RePEc:eee:dyncon:v:20:y:1996:i:5:p:945-9612012-12-25RePEc:eee:dyncon
article
Incomplete asset markets and the cross-country consumption correlation puzzle
5
1996
20
5
945
961
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00883-7
Kollmann, Robert
oai:RePEc:eee:dyncon:v:30:y:2006:i:12:p:2693-27242012-12-25RePEc:eee:dyncon
article
Interpolation and backdating with a large information set
12
2006
30
12
2693
2724
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00193-4
Angelini, Elena
Henry, Jerome
Marcellino, Massimiliano
oai:RePEc:eee:dyncon:v:30:y:2006:i:9-10:p:1569-15872012-12-25RePEc:eee:dyncon
article
The stochastic lake game: A numerical solution
9-10
2006
30
1569
1587
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00053-4
Dechert, W.D.
O'Donnell, S.I.
oai:RePEc:eee:dyncon:v:31:y:2007:i:2:p:493-5132012-12-25RePEc:eee:dyncon
article
A theory of optimal deadlines
2
2007
31
2
493
513
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00021-2
Toxvaerd, Flavio
oai:RePEc:eee:dyncon:v:23:y:1999:i:7:p:909-9282012-12-25RePEc:eee:dyncon
article
Alternative bias approximations in first-order dynamic reduced form models
7
1999
23
6
909
928
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00055-4
Kiviet, Jan F.
Phillips, Garry D. A.
Schipp, Bernhard
oai:RePEc:eee:dyncon:v:25:y:2001:i:12:p:1935-19502012-12-25RePEc:eee:dyncon
article
Necessary conditions for infinite-horizon discounted two-stage optimal control problems
12
2001
25
12
1935
1950
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00009-9
Makris, Miltiadis
oai:RePEc:eee:dyncon:v:28:y:2004:i:8:p:1635-16602012-12-25RePEc:eee:dyncon
article
Solving for optimal simple rules in rational expectations models
8
2004
28
6
1635
1660
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00097-6
Dennis, Richard
oai:RePEc:eee:dyncon:v:3:y:1981:i:1:p:307-3172012-12-25RePEc:eee:dyncon
article
The value of information in a storage model with open- and closed-loop controls A numerical example
1
1981
3
11
307
317
http://www.sciencedirect.com/science/article/pii/0165-1889(81)90020-8
Bradford, David F.
Kelehan, Harry H.
oai:RePEc:eee:dyncon:v:27:y:2003:i:4:p:651-6652012-12-25RePEc:eee:dyncon
article
Forward trading and storage in a Cournot duopoly
4
2003
27
2
651
665
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00067-7
Thille, Henry
oai:RePEc:eee:dyncon:v:22:y:1998:i:8-9:p:1275-12892012-12-25RePEc:eee:dyncon
article
Krylov methods for solving models with forward-looking variables
8-9
1998
22
8
1275
1289
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00012-8
Gilli, Manfred
Pauletto, Giorgio
oai:RePEc:eee:dyncon:v:26:y:2002:i:5:p:869-8872012-12-25RePEc:eee:dyncon
article
Mood fluctuations, projection bias, and volatility of equity prices
5
2002
26
5
869
887
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00035-5
Mehra, Rajnish
Sah, Raaj
oai:RePEc:eee:dyncon:v:20:y:1996:i:4:p:583-6002012-12-25RePEc:eee:dyncon
article
Experimental evidence on money as a medium of exchange
4
1996
20
4
583
600
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00865-9
Brown, Paul M.
oai:RePEc:eee:dyncon:v:28:y:2004:i:7:p:1437-14602012-12-25RePEc:eee:dyncon
article
Investment under uncertainty: calculating the value function when the Bellman equation cannot be solved analytically
7
2004
28
4
1437
1460
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00110-6
Dangl, Thomas
Wirl, Franz
oai:RePEc:eee:dyncon:v:18:y:1994:i:6:p:1069-10922012-12-25RePEc:eee:dyncon
article
Parametric continuity in dynamic programming problems
6
1994
18
11
1069
1092
http://www.sciencedirect.com/science/article/pii/0165-1889(94)90048-5
Dutta, Prajit K.
Majumdar, Mukul K.
Sundaram, Rangarajan K.
oai:RePEc:eee:dyncon:v:22:y:1998:i:10:p:1575-16032012-12-25RePEc:eee:dyncon
article
Sustained endogenous growth with decreasing returns and heterogeneous capital
10
1998
22
8
1575
1603
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00106-1
Kaganovich, Michael
oai:RePEc:eee:dyncon:v:36:y:2012:i:8:p:1142-11612012-12-25RePEc:eee:dyncon
article
Excess covariance and dynamic instability in a multi-asset model
The presence of excess covariance in financial price returns is an accepted empirical fact: the price dynamics of financial assets tend to be more correlated than their fundamentals would justify. We advance an explanation of this fact based on an intertemporal equilibrium multi-assets model of financial markets with an explicit and endogenous price dynamics. The market is driven by an exogenous stochastic process of dividend yields paid by the assets that we identify as market fundamentals. The model is rather flexible and allows for the coexistence of different trading strategies. The evolution of assets price and traders' wealth is described by a high-dimensional stochastic dynamical system. We identify the equilibria of the model consistent with a baseline assumption of procedural rationality. We show that these equilibria are characterized by excess covariance in prices with respect to the dividend process. Moreover, we show that in equilibrium there is a positive expected marginal profit in choosing more risky portfolios. As a consequence, the evolutionary pressure generates a trend towards more remunerative strategies, which, in turn, increase the variance of prices and the dynamic instability of the system.
Excess covariance; Capital asset pricing model; Efficient market hypothesis; Heterogeneous agents; Procedurally consistent equilibrium;
8
2012
36
1142
1161
D81
G11
G12
http://www.sciencedirect.com/science/article/pii/S0165188912000875
Anufriev, Mikhail
Bottazzi, Giulio
Marsili, Matteo
Pin, Paolo
oai:RePEc:eee:dyncon:v:31:y:2007:i:5:p:1781-18002012-12-25RePEc:eee:dyncon
article
Corporate control and real investment in incomplete markets
5
2007
31
5
1781
1800
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00164-3
Hugonnier, Julien
Morellec, Erwan
oai:RePEc:eee:dyncon:v:25:y:2001:i:12:p:1973-19872012-12-25RePEc:eee:dyncon
article
Time consistent side payments in a dynamic game of downstream pollution
12
2001
25
12
1973
1987
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00013-0
Jorgensen, Steffen
Zaccour, Georges
oai:RePEc:eee:dyncon:v:28:y:2004:i:11:p:2277-22952012-12-25RePEc:eee:dyncon
article
Consistent high-frequency calibration
11
2004
28
10
2277
2295
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00207-0
Aadland, David
Huang, Kevin X. D.
oai:RePEc:eee:dyncon:v:23:y:1999:i:5-6:p:773-7952012-12-25RePEc:eee:dyncon
article
Growth and the dynamics of trade liberalization
5-6
1999
23
4
773
795
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00043-8
Devereux, Michael B.
oai:RePEc:eee:dyncon:v:31:y:2007:i:6:p:2108-21332012-12-25RePEc:eee:dyncon
article
Evolutionary game dynamics and the analysis of agent-based imitation models: The long run, the medium run and the importance of global analysis
6
2007
31
6
2108
2133
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00012-7
Dawid, Herbert
oai:RePEc:eee:dyncon:v:32:y:2008:i:9:p:3032-30532012-12-25RePEc:eee:dyncon
article
The optimal economic lifetime of vintage capital in the presence of operating costs, technological progress, and learning
9
2008
32
9
3032
3053
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00004-3
Goetz, Renan-Ulrich
Hritonenko, Natali
Yatsenko, Yuri
oai:RePEc:eee:dyncon:v:22:y:1998:i:4:p:489-5012012-12-25RePEc:eee:dyncon
article
A robust method for simulating forward-looking models
4
1998
22
4
489
501
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00081-X
Armstrong, John
Black, Richard
Laxton, Douglas
Rose, David
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:51-572012-12-25RePEc:eee:dyncon
article
Policy design in asymmetrically dependent economies
1-2
1986
10
6
51
57
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90017-5
Hughes Hallett, A. J.
oai:RePEc:eee:dyncon:v:14:y:1990:i:1:p:65-712012-12-25RePEc:eee:dyncon
article
An improved algorithm to solve a discrete matrix riccati equation
1
1990
14
2
65
71
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90006-3
Pujol, Thierry
oai:RePEc:eee:dyncon:v:14:y:1990:i:3-4:p:627-6532012-12-25RePEc:eee:dyncon
article
Sources of complex dynamics in two-sector growth models
3-4
1990
14
10
627
653
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90036-G
Boldrin, Michele
Deneckere, Raymond J.
oai:RePEc:eee:dyncon:v:32:y:2008:i:8:p:2428-24522012-12-25RePEc:eee:dyncon
article
On the application and use of DSGE models
8
2008
32
8
2428
2452
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00198-4
Alvarez-Lois, Pedro
Harrison, Richard
Piscitelli, Laura
Scott, Alasdair
oai:RePEc:eee:dyncon:v:1:y:1979:i:1:p:101-1092012-12-25RePEc:eee:dyncon
article
The report of the committee on policy optimisation-- UK
1
1979
1
2
101
109
http://www.sciencedirect.com/science/article/pii/S0165-1889(79)80007-X
Johansen, Leif
oai:RePEc:eee:dyncon:v:22:y:1998:i:5:p:729-7622012-12-25RePEc:eee:dyncon
article
On the open-loop Nash equilibrium in LQ-games
5
1998
22
5
729
762
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00084-5
Engwerda, Jacob C.
oai:RePEc:eee:dyncon:v:20:y:1996:i:1-3:p:445-4702012-12-25RePEc:eee:dyncon
article
Composition of R&D and technological cycles
1-3
1996
20
445
470
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00859-6
Bhattacharjya, Ashoke S.
oai:RePEc:eee:dyncon:v:10:y:1986:i:3:p:367-3942012-12-25RePEc:eee:dyncon
article
Equilibrium turnpike theory with time-separable utility
3
1986
10
9
367
394
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90003-5
Coles, Jeffrey L.
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:99-1072012-12-25RePEc:eee:dyncon
article
New perspectives from the complex plane
1-2
1986
10
6
99
107
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90025-4
Livesey, D. A.
oai:RePEc:eee:dyncon:v:29:y:2005:i:3:p:509-5272012-12-25RePEc:eee:dyncon
article
Factor price uncertainty, technology choice and investment delay
3
2005
29
3
509
527
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00047-8
Kaboski, Joseph P.
oai:RePEc:eee:dyncon:v:17:y:1993:i:4:p:659-6782012-12-25RePEc:eee:dyncon
article
A cooperative incentive equilibrium for a resource management problem
4
1993
17
7
659
678
http://www.sciencedirect.com/science/article/pii/0165-1889(93)90051-S
Ehtamo, Harri
Hamalainen, Raimo P.
oai:RePEc:eee:dyncon:v:14:y:1990:i:1:p:73-952012-12-25RePEc:eee:dyncon
article
Supply management with intermittent trade disruptions when the probabilities are not fully known
1
1990
14
2
73
95
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90007-4
Lindsey, Robin
oai:RePEc:eee:dyncon:v:36:y:2012:i:9:p:1402-14132012-12-25RePEc:eee:dyncon
article
Costly information transmission in continuous time with implications for credit rating announcements
This paper formulates a continuous-time information transmission model in which an altruistic sender privately observes a stochastic state variable, and incurs a communication cost when she broadcasts a message. We characterize the sender's optimal announcement strategy using an ordinary differential equation. We prove the optimality of the sender's strategies using a martingale verification argument and show that the sender's optimal strategy involves sending discrete messages. Furthermore, we apply the model to the timing decision of credit rating announcements and provide a framework to study various aspects of rating announcements, such as the probability of rating reversals and the expected time before a rating change.
Dynamic information transmission; Costly talk; Credit rating announcement;
9
2012
36
1402
1413
D81
D83
C61
http://www.sciencedirect.com/science/article/pii/S0165188912000656
Wang, Hefei
oai:RePEc:eee:dyncon:v:25:y:2001:i:12:p:1911-19182012-12-25RePEc:eee:dyncon
article
Sustainable growth, renewable resources and pollution
12
2001
25
12
1911
1918
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00007-5
Ayong Le Kama, Alain D.
oai:RePEc:eee:dyncon:v:20:y:1996:i:6-7:p:1237-12612012-12-25RePEc:eee:dyncon
article
From decay to growth: A demographic transition to economic growth
6-7
1996
20
1237
1261
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00898-5
Tamura, Robert
oai:RePEc:eee:dyncon:v:27:y:2003:i:5:p:853-8732012-12-25RePEc:eee:dyncon
article
Intellectual property rights protection and endogenous economic growth
5
2003
27
3
853
873
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00018-0
Kwan, Yum K.
Lai, Edwin L. -C.
oai:RePEc:eee:dyncon:v:29:y:2005:i:9:p:1517-15452012-12-25RePEc:eee:dyncon
article
Specialization and non-renewable resources: Ricardo meets Ricardo
9
2005
29
9
1517
1545
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00111-3
Chakravorty, Ujjayant
Krulce, Darrell
Roumasset, James
oai:RePEc:eee:dyncon:v:27:y:2002:i:1:p:51-622012-12-25RePEc:eee:dyncon
article
A differential game approach to investment in product differentiation
1
2002
27
11
51
62
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00026-4
Cellini, Roberto
Lambertini, Luca
oai:RePEc:eee:dyncon:v:29:y:2005:i:10:p:1673-17002012-12-25RePEc:eee:dyncon
article
Infectious disease and preventive behavior in an overlapping generations model
10
2005
29
10
1673
1700
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00118-6
Momota, Akira
Tabata, Ken
Futagami, Koichi
oai:RePEc:eee:dyncon:v:21:y:1997:i:1:p:1-222012-12-25RePEc:eee:dyncon
article
Endogenous growth theory: An introduction
1
1997
21
1
1
22
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00924-8
Jones, Larry E.
Manuelli, Rodolfo E.
oai:RePEc:eee:dyncon:v:31:y:2007:i:5:p:1728-17522012-12-25RePEc:eee:dyncon
article
The climate change learning curve
5
2007
31
5
1728
1752
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00126-6
Leach, Andrew J.
oai:RePEc:eee:dyncon:v:33:y:2009:i:3:p:554-5672012-12-25RePEc:eee:dyncon
article
Demographic structure and capital accumulation: A quantitative assessment
In a recent paper, d'Albis [2007. Demographic structure and capital accumulation. Journal of Economic Theory 132, 411-434] shows that the effect of population growth on capital accumulation is ambiguous in overlapping-generations models with age-specific mortality rates, contrasting to the predicted negative effect in Diamond [1965. National debt in a neoclassical growth model. American Economic Review 55, 1126-1150] and Blanchard [1985. Debt, deficits, and finite horizons. Journal of Political Economy 93, 223-247]. The quantitative exercises of this paper indicate that while in principle a positive relation between population growth and capital accumulation is possible, this relation is practically always negative for industrial countries. Intuition based on capital dilution and aggregate saving effects is provided. This paper also complements d'Albis [2007. Demographic structure and capital accumulation. Journal of Economic Theory 132, 411-434] in characterizing the steady-state equilibrium in more familiar economic concepts.
Age-specific mortality rates Overlapping generations Population growth Capital accumulation
3
2009
33
3
554
567
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00145-0
Lau, Sau-Him Paul
oai:RePEc:eee:dyncon:v:20:y:1996:i:6-7:p:979-10062012-12-25RePEc:eee:dyncon
article
Learning, regime switches, and equilibrium asset pricing dynamics
6-7
1996
20
979
1006
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00886-1
Moore, Bartholomew
Schaller, Huntley
oai:RePEc:eee:dyncon:v:28:y:2003:i:3:p:467-4922012-12-25RePEc:eee:dyncon
article
Nonlinear Phillips curves, mixing feedback rules and the distribution of inflation and output
3
2003
28
12
467
492
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00184-7
Corrado, Luisa
Holly, Sean
oai:RePEc:eee:dyncon:v:18:y:1994:i:1:p:251-2712012-12-25RePEc:eee:dyncon
article
Causal reasoning and explanation in dynamic economic systems
1
1994
18
1
251
271
http://www.sciencedirect.com/science/article/pii/0165-1889(94)90078-7
Berndsen, Ron
Daniels, Hennie
oai:RePEc:eee:dyncon:v:32:y:2008:i:1:p:279-3022012-12-25RePEc:eee:dyncon
article
Determining the optimal dimensionality of multivariate volatility models with tools from random matrix theory
1
2008
32
1
279
302
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00048-6
Rosenow, Bernd
oai:RePEc:eee:dyncon:v:30:y:2006:i:1:p:55-792012-12-25RePEc:eee:dyncon
article
Effective securities in arbitrage-free markets with bid-ask spreads at liquidation: a linear programming characterization
1
2006
30
1
55
79
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00137-X
Baccara, Mariagiovanna
Battauz, Anna
Ortu, Fulvio
oai:RePEc:eee:dyncon:v:3:y:1981:i:1:p:119-1402012-12-25RePEc:eee:dyncon
article
Dynamic optimal pricing and (possibly) advertising in the face of various kinds of potential entrants
1
1981
3
11
119
140
http://www.sciencedirect.com/science/article/pii/0165-1889(81)90007-5
Bourguignon, Francoise
Sethi, Suresh P.
oai:RePEc:eee:dyncon:v:19:y:1995:i:8:p:1511-15282012-12-25RePEc:eee:dyncon
article
Social insurance and taxation under sequential majority voting and utilitarian regimes
8
1995
19
11
1511
1528
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00840-E
Rao Aiyagari, S.
Peled, Dan
oai:RePEc:eee:dyncon:v:29:y:2005:i:1-2:p:321-3342012-12-25RePEc:eee:dyncon
article
Globalization, polarization and cultural drift
1-2
2005
29
1
321
334
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00017-X
Klemm, Konstantin
Eguiluz, Victor M.
Toral, Raul
Miguel, Maxi San
oai:RePEc:eee:dyncon:v:31:y:2007:i:12:p:3791-38212012-12-25RePEc:eee:dyncon
article
Public support to innovation and imitation in a non-scale growth model
12
2007
31
12
3791
3821
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00024-3
Perez-Sebastian, Fidel
oai:RePEc:eee:dyncon:v:21:y:1997:i:8-9:p:1405-14252012-12-25RePEc:eee:dyncon
article
Solving long-term financial planning problems via global optimization
8-9
1997
21
6
1405
1425
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00032-8
Maranas, C. D.
Androulakis, I. P.
Floudas, C. A.
Berger, A. J.
Mulvey, J. M.
oai:RePEc:eee:dyncon:v:33:y:2009:i:4:p:903-9212012-12-25RePEc:eee:dyncon
article
Investment timing, asymmetric information, and audit structure: A real options framework
This paper examines investment timing by the manager in a decentralized firm in the presence of asymmetric information. In particular, we incorporate an audit technology in the agency model developed by Grenadier and Wang [2005. Investment timing, agency, and information. Journal of Financial Economics 75, 493-533]. The implied investment trigger in the agency problem with auditing is larger than in the full-information problem, and smaller than in the agency problem without auditing. Nevertheless, the audit technology does not necessarily reduce inefficiency in the total social welfare.
Real options Asymmetric information Agency conflicts Audit
4
2009
33
4
903
921
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00185-1
Shibata, Takashi
oai:RePEc:eee:dyncon:v:31:y:2007:i:12:p:3889-39032012-12-25RePEc:eee:dyncon
article
A non-parametric test for independence based on symbolic dynamics
12
2007
31
12
3889
3903
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00036-X
Matilla-Garcia, Mariano
oai:RePEc:eee:dyncon:v:26:y:2002:i:6:p:985-10072012-12-25RePEc:eee:dyncon
article
Monopolistic competition, dynamic inefficiency and asset bubbles
6
2002
26
6
985
1007
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00006-9
Femminis, Gianluca
oai:RePEc:eee:dyncon:v:12:y:1988:i:1:p:127-1332012-12-25RePEc:eee:dyncon
article
Dynamic adjustment of firms' capital structures in a varying-risk environment
1
1988
12
3
127
133
http://www.sciencedirect.com/science/article/pii/0165-1889(88)90024-3
Baum, Christopher F.
Doyle, Joanne M.
oai:RePEc:eee:dyncon:v:11:y:1987:i:3:p:331-3572012-12-25RePEc:eee:dyncon
article
The dynamic analysis of continuous-time life-cycle savings growth models
3
1987
11
9
331
357
http://www.sciencedirect.com/science/article/pii/S0165-1889(87)80011-8
Laitner, John
oai:RePEc:eee:dyncon:v:31:y:2007:i:8:p:2802-28262012-12-25RePEc:eee:dyncon
article
Capital and macroeconomic instability in a discrete-time model with forward-looking interest rate rules
8
2007
31
8
2802
2826
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00182-5
Huang, Kevin X.D.
Meng, Qinglai
oai:RePEc:eee:dyncon:v:24:y:2000:i:4:p:623-6502012-12-25RePEc:eee:dyncon
article
Surplus analysis for overlapping generations
4
2000
24
4
623
650
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00002-0
Silvestre, Joaquim
oai:RePEc:eee:dyncon:v:32:y:2008:i:1:p:137-1552012-12-25RePEc:eee:dyncon
article
Stock market crashes as social phase transitions
1
2008
32
1
137
155
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00043-7
Levy, Moshe
oai:RePEc:eee:dyncon:v:21:y:1997:i:8-9:p:1267-13212012-12-25RePEc:eee:dyncon
article
Monte Carlo methods for security pricing
8-9
1997
21
6
1267
1321
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00028-6
Boyle, Phelim
Broadie, Mark
Glasserman, Paul
oai:RePEc:eee:dyncon:v:1:y:1979:i:1:p:85-992012-12-25RePEc:eee:dyncon
article
Optimal monetary policy under flexible exchange rates
1
1979
1
2
85
99
http://www.sciencedirect.com/science/article/pii/S0165-1889(79)80006-8
Turnovsky, Stephen J.
oai:RePEc:eee:dyncon:v:17:y:1993:i:1-2:p:181-2052012-12-25RePEc:eee:dyncon
article
The role of the target saving motive in guest worker migration A theoretical study
1-2
1993
17
181
205
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)80009-6
Berninghaus, Siegfried
Seifert-Vogt, Hans Gunther
oai:RePEc:eee:dyncon:v:27:y:2003:i:3:p:357-3792012-12-25RePEc:eee:dyncon
article
Calculating short-run adjustments: Sensitivity to non-linearities in a representative agent framework
3
2003
27
1
357
379
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00029-X
Stemp, Peter J.
Herbert, Ric D.
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:67-712012-12-25RePEc:eee:dyncon
article
Limit pricing in a mature market A dynamic game approach
1-2
1986
10
6
67
71
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90020-5
Shupp, Franklin R.
oai:RePEc:eee:dyncon:v:29:y:2005:i:8:p:1313-13292012-12-25RePEc:eee:dyncon
article
Necessity of the transversality condition for stochastic models with bounded or CRRA utility
8
2005
29
8
1313
1329
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00094-6
Kamihigashi, Takashi
oai:RePEc:eee:dyncon:v:3:y:1981:i:1:p:217-2342012-12-25RePEc:eee:dyncon
article
Choosing a monetary instrument The case of supply-side shocks
1
1981
3
11
217
234
http://www.sciencedirect.com/science/article/pii/0165-1889(81)90016-6
Craine, Roger
Havenner, Arthur
oai:RePEc:eee:dyncon:v:33:y:2009:i:2:p:491-5062012-12-25RePEc:eee:dyncon
article
Underreaction to fundamental information and asymmetry in mispricing between bullish and bearish markets. An experimental study
In contrast to existing literature we implement experimental asset markets with fluctuating fundamental values following a stochastic process. Therefore we can measure traders' behavior in both bullish and bearish markets. We observe underreaction of price changes to changes in fundamental value which induces overvaluation in bearish and undervaluation in bullish markets. We also find an asymmetry between markets with bullish fundamental values and those with bearish ones as the former markets show a higher degree of informational efficiency. The reason for the observed underreaction lies in the relatively large volatility of the underlying fundamental value process.
Asset markets Bubbles Experiment Underreaction
2
2009
33
2
491
506
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00142-5
Kirchler, Michael
oai:RePEc:eee:dyncon:v:11:y:1987:i:4:p:483-4982012-12-25RePEc:eee:dyncon
article
A model of strategic default of sovereign debt
4
1987
11
12
483
498
http://www.sciencedirect.com/science/article/pii/S0165-1889(87)80002-7
Kulatilaka, Nalin
Marcus, Alan J.
oai:RePEc:eee:dyncon:v:14:y:1990:i:3-4:p:741-7622012-12-25RePEc:eee:dyncon
article
The solution of the infinite horizon tracking problem for discrete time systems possessing an exogenous component
3-4
1990
14
10
741
762
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90041-E
Engwerda, Jacob Chr.
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:261-2672012-12-25RePEc:eee:dyncon
article
Dynamical systems in macroeconomics: Alternative approaches to the analysis of macroeconomic fluctuations
1-2
1986
10
6
261
267
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90048-5
Sordi, Serena
oai:RePEc:eee:dyncon:v:21:y:1997:i:8-9:p:1353-13762012-12-25RePEc:eee:dyncon
article
Optimal delta-hedging under transactions costs
8-9
1997
21
6
1353
1376
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00030-4
Clewlow, Les
Hodges, Stewart
oai:RePEc:eee:dyncon:v:31:y:2007:i:3:p:1015-10362012-12-25RePEc:eee:dyncon
article
Fiscal policy rules in an overlapping generations model with endogenous labour supply
3
2007
31
3
1015
1036
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00077-7
Ganelli, Giovanni
oai:RePEc:eee:dyncon:v:14:y:1990:i:2:p:435-4502012-12-25RePEc:eee:dyncon
article
Qualitative dynamics and causality in a Keynesian model
2
1990
14
5
435
450
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90028-F
Berndsen, Ron
Daniels, Hennie
oai:RePEc:eee:dyncon:v:36:y:2012:i:8:p:1267-12832012-12-25RePEc:eee:dyncon
article
Leverage as a predictor for real activity and volatility
This paper explores the link between the leverage of the US financial sector, of households and of non-financial businesses, and real activity. We document that leverage is negatively correlated with the future growth of real activity, and positively linked to the conditional volatility of future real activity and of equity returns. The joint information in sectoral leverage series is more relevant for predicting future real activity than the information contained in any individual leverage series. Using in-sample regressions and out-of sample forecasts, we show that the predictive power of leverage is roughly comparable to that of macro and financial predictors commonly used by forecasters. Leverage information would not have allowed to predict the ‘Great Recession’ of 2008–2009 any better than conventional macro/financial predictors.
Leverage; Financial crisis; Forecasts; Real activity; Volatility;
8
2012
36
1267
1283
E32
E37
C53
G20
http://www.sciencedirect.com/science/article/pii/S0165188912000826
Kollmann, Robert
Zeugner, Stefan
oai:RePEc:eee:dyncon:v:12:y:1988:i:2-3:p:447-4612012-12-25RePEc:eee:dyncon
article
Nearly redundant parameters and measures of persistence in economic time series
2-3
1988
12
447
461
http://www.sciencedirect.com/science/article/pii/0165-1889(88)90049-8
Clark, Peter K.
oai:RePEc:eee:dyncon:v:33:y:2009:i:2:p:507-5242012-12-25RePEc:eee:dyncon
article
Investment under uncertainty with price ceilings in oligopolies
We study the impact of price cap regulation on the level and timing of investment in an oligopolistic (Cournot) industry facing stochastic demand. We find that a price ceiling affects investment decisions in two mutually competing ways: it makes the option to defer investment more valuable, but at the same time it reduces the incentive for firms to strategically underinvest in order to raise prices. We show that while sensible price cap regulation speeds up investment, a low price cap can be a disincentive for investment. There exists an optimal price cap independent of market concentration - the competitive investment price trigger - that maximizes investment incentives and in the long term increases industry installed capacity. This optimal price cap becomes less effective and less robust as the market becomes more competitive and as demand volatility increases. Errors in estimation of the optimal price cap have asymmetric effects: underestimation has more dire consequences than overestimation.
Real options Stochastic games Price cap regulation Demand uncertainty Utility industries
2
2009
33
2
507
524
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00146-2
Roques, Fabien A.
Savva, Nicos
oai:RePEc:eee:dyncon:v:22:y:1998:i:7:p:1117-11372012-12-25RePEc:eee:dyncon
article
Chaotic dynamics in a cash-in-advance economy
7
1998
22
5
1117
1137
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00096-1
Michener, Ronald
Ravikumar, B.
oai:RePEc:eee:dyncon:v:25:y:2001:i:3-4:p:459-5022012-12-25RePEc:eee:dyncon
article
Evolving market structure: An ACE model of price dispersion and loyalty
3-4
2001
25
3
459
502
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00033-6
Kirman, Alan P.
Vriend, Nicolaas J.
oai:RePEc:eee:dyncon:v:26:y:2002:i:9-10:p:1585-16112012-12-25RePEc:eee:dyncon
article
Dynamic specifications in optimizing trend-deviation macro models
9-10
2002
26
8
1585
1611
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00086-0
Kozicki, Sharon
Tinsley, P. A.
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:157-1612012-12-25RePEc:eee:dyncon
article
Distributed lag analysis The Pade z-transform method
1-2
1986
10
6
157
161
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90033-3
Claverie, Pierre
Szpiro, Daniel
Topol, Richard
oai:RePEc:eee:dyncon:v:32:y:2008:i:1:p:235-2582012-12-25RePEc:eee:dyncon
article
Cluster analysis for portfolio optimization
1
2008
32
1
235
258
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00046-2
Tola, Vincenzo
Lillo, Fabrizio
Gallegati, Mauro
Mantegna, Rosario N.
oai:RePEc:eee:dyncon:v:18:y:1994:i:1:p:161-1842012-12-25RePEc:eee:dyncon
article
Variational inequalities in the analysis and computation of multi-sector, multi-instrument financial equilibria
1
1994
18
1
161
184
http://www.sciencedirect.com/science/article/pii/0165-1889(94)90074-4
Nagurney, Anna
oai:RePEc:eee:dyncon:v:31:y:2007:i:5:p:1535-15562012-12-25RePEc:eee:dyncon
article
Explaining fashion cycles: Imitators chasing innovators in product space
5
2007
31
5
1535
1556
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00118-7
Caulkins, Jonathan P.
Hartl, Richard F.
Kort, Peter M.
Feichtinger, Gustav
oai:RePEc:eee:dyncon:v:36:y:2012:i:10:p:1431-14472012-12-25RePEc:eee:dyncon
article
An evolutionary analysis of turnout with conformist citizens
We propose an evolutionary analysis of a voting game where citizens have a preference for conformism that adds to the instrumental preference for the electoral outcome. Multiple equilibria arise, and some generate high turnout. Simulations of best response dynamics show that high turnout is asymptotically stable if conformism matters but its likelihood depends on the reference group for conformism: high turnout is more likely when voters care about their own group's choice, as this better overrides the free rider problem of voting games. Comparative statics on the voting cost distribution, and the groups' composition are also done.
Turnout; Coordination games; Poisson games; Conformism; Selection dynamics;
10
2012
36
1431
1447
D72
C72
C73
http://www.sciencedirect.com/science/article/pii/S0165188912001248
Landi, M.
Sodini, M.
oai:RePEc:eee:dyncon:v:13:y:1989:i:3:p:485-4972012-12-25RePEc:eee:dyncon
article
Oscillations in the Rodriguez model of entry and price dynamics
3
1989
13
7
485
497
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90034-1
Zhang, Wei-Bin
oai:RePEc:eee:dyncon:v:29:y:2005:i:3:p:449-4682012-12-25RePEc:eee:dyncon
article
Optimal portfolio management with American capital guarantee
3
2005
29
3
449
468
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00044-2
El Karoui, Nicole
Jeanblanc, Monique
Lacoste, Vincent
oai:RePEc:eee:dyncon:v:30:y:2006:i:12:p:2725-27482012-12-25RePEc:eee:dyncon
article
Are hyperinflation paths learnable?
12
2006
30
12
2725
2748
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00194-6
Adam, Klaus
Evans, George W.
Honkapohja, Seppo
oai:RePEc:eee:dyncon:v:13:y:1989:i:2:p:271-2822012-12-25RePEc:eee:dyncon
article
IR & D project data and theories of R & D investment
2
1989
13
4
271
282
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90022-5
Lichtenberg, Frank R.
oai:RePEc:eee:dyncon:v:31:y:2007:i:1:p:325-3592012-12-25RePEc:eee:dyncon
article
Fiscal policy, monopolistic competition, and finite lives
1
2007
31
1
325
359
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00024-8
Heijdra, Ben J.
Ligthart, Jenny E.
oai:RePEc:eee:dyncon:v:27:y:2003:i:10:p:1743-17702012-12-25RePEc:eee:dyncon
article
Stochastic equilibrium: learning by exponential smoothing
10
2003
27
8
1743
1770
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00081-7
Potzelberger, Klaus
Sogner, Leopold
oai:RePEc:eee:dyncon:v:27:y:2003:i:11-12:p:1941-19592012-12-25RePEc:eee:dyncon
article
Global dynamics in macroeconomics: an overlapping generations example
11-12
2003
27
9
1941
1959
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00111-2
Gomis-Porqueras, Pere
Haro, Alex
oai:RePEc:eee:dyncon:v:22:y:1998:i:3:p:369-3992012-12-25RePEc:eee:dyncon
article
A Hicksian two-sector model of unemployment, cycles, and growth
3
1998
22
3
369
399
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00064-X
Hori, Hajime
oai:RePEc:eee:dyncon:v:26:y:2002:i:7-8:p:1323-13522012-12-25RePEc:eee:dyncon
article
Stochastic dominance bounds on derivatives prices in a multiperiod economy with proportional transaction costs
7-8
2002
26
7
1323
1352
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00047-1
Constantinides, George M.
Perrakis, Stylianos
oai:RePEc:eee:dyncon:v:5:y:1983:i:1:p:187-1992012-12-25RePEc:eee:dyncon
article
Limit price entry prevention when complete information is lacking
1
1983
5
2
187
199
http://www.sciencedirect.com/science/article/pii/0165-1889(83)90021-0
Friedman, James W.
oai:RePEc:eee:dyncon:v:25:y:2001:i:3-4:p:527-5592012-12-25RePEc:eee:dyncon
article
A multi-agent model for describing transhumance in North Cameroon: Comparison of different rationality to develop a routine
3-4
2001
25
3
527
559
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00035-X
Rouchier, Juliette
Bousquet, Francois
Requier-Desjardins, Melanie
Antona, Martine
oai:RePEc:eee:dyncon:v:26:y:2002:i:9-10:p:1557-15832012-12-25RePEc:eee:dyncon
article
The parametric path method: an alternative to Fair-Taylor and L-B-J for solving perfect foresight models
9-10
2002
26
8
1557
1583
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00085-9
Judd, Kenneth L.
oai:RePEc:eee:dyncon:v:5:y:1983:i:1:p:151-1712012-12-25RePEc:eee:dyncon
article
The variability of output-inflation tradeoffs
1
1983
5
2
151
171
http://www.sciencedirect.com/science/article/pii/0165-1889(83)90019-2
Abrams, Richard K.
Froyen, Richard T.
Waud, Roger N.
oai:RePEc:eee:dyncon:v:27:y:2003:i:6:p:909-9352012-12-25RePEc:eee:dyncon
article
Foreign exchange trading models and market behavior
6
2003
27
4
909
935
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00049-0
Gencay, Ramazan
Dacorogna, Michel
Olsen, Richard
Pictet, Olivier
oai:RePEc:eee:dyncon:v:14:y:1990:i:3-4:p:685-7082012-12-25RePEc:eee:dyncon
article
Delaying or deterring entry A game-theoretic analysis
3-4
1990
14
10
685
708
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90038-I
Lipman, Barton L.
oai:RePEc:eee:dyncon:v:27:y:2003:i:6:p:937-9692012-12-25RePEc:eee:dyncon
article
The stable non-Gaussian asset allocation: a comparison with the classical Gaussian approach
6
2003
27
4
937
969
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00050-7
Tokat, Yesim
Rachev, Svetlozar T.
Schwartz, Eduardo S.
oai:RePEc:eee:dyncon:v:30:y:2006:i:7:p:1081-11042012-12-25RePEc:eee:dyncon
article
Inventories, market structure, and price volatility
7
2006
30
7
1081
1104
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00089-8
Thille, Henry
oai:RePEc:eee:dyncon:v:30:y:2006:i:3:p:361-3912012-12-25RePEc:eee:dyncon
article
Short-memory and the PPP hypothesis
3
2006
30
3
361
391
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00037-0
El-Gamal, Mahmoud A.
Ryu, Deockhyun
oai:RePEc:eee:dyncon:v:11:y:1987:i:1:p:65-782012-12-25RePEc:eee:dyncon
article
Efficient equilibria in a differential game of capitalism
1
1987
11
3
65
78
http://www.sciencedirect.com/science/article/pii/0165-1889(87)90024-8
Haurie, Alain
Pohjola, Matti
oai:RePEc:eee:dyncon:v:28:y:2004:i:5:p:859-8602012-12-25RePEc:eee:dyncon
article
Financial decision models in a dynamical setting
5
2004
28
2
859
860
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00054-X
Mitra, Gautam
Zenios, Stavros
oai:RePEc:eee:dyncon:v:31:y:2007:i:11:p:3459-34772012-12-25RePEc:eee:dyncon
article
Towards endogenous recombinant growth
11
2007
31
11
3459
3477
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00225-9
Tsur, Yacov
Zemel, Amos
oai:RePEc:eee:dyncon:v:27:y:2002:i:2:p:303-3272012-12-25RePEc:eee:dyncon
article
Testing for hysteresis against nonlinear alternatives
2
2002
27
12
303
327
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00051-3
Hughes Hallett, A. J.
Piscitelli, Laura
oai:RePEc:eee:dyncon:v:15:y:1991:i:1:p:197-2132012-12-25RePEc:eee:dyncon
article
Temporary stabilization policy : The case of flexible prices and exchange rates
1
1991
15
197
213
http://www.sciencedirect.com/science/article/pii/0165-1889(91)90033-W
Calvo, Guillermo A.
oai:RePEc:eee:dyncon:v:30:y:2006:i:1:p:111-1412012-12-25RePEc:eee:dyncon
article
Financial crashes as endogenous jumps: estimation, testing and forecasting
1
2006
30
1
111
141
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00005-9
Fernandes, Marcelo
oai:RePEc:eee:dyncon:v:20:y:1996:i:5:p:905-9232012-12-25RePEc:eee:dyncon
article
A multisectoral general equilibrium model of Schumpeterian growth and fluctuations
5
1996
20
5
905
923
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00881-0
Cheng, Leonard K.
Dinopoulos, Elias
oai:RePEc:eee:dyncon:v:27:y:2003:i:5:p:875-9052012-12-25RePEc:eee:dyncon
article
Dynamic production teams with strategic behavior
5
2003
27
3
875
905
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00019-2
Breton, Michele
St-Amour, Pascal
Vencatachellum, Desire
oai:RePEc:eee:dyncon:v:16:y:1992:i:2:p:225-2412012-12-25RePEc:eee:dyncon
article
On dynamics with time-to-build investment technology and non-time-separable leisure
2
1992
16
4
225
241
http://www.sciencedirect.com/science/article/pii/0165-1889(92)90032-A
Ioannides, Yannis M.
Taub, Bart
oai:RePEc:eee:dyncon:v:36:y:2012:i:10:p:1626-16582012-12-25RePEc:eee:dyncon
article
Numerical computation of the optimal vector field: Exemplified by a fishery model
Numerous optimal control models analyzed in economics are formulated as discounted infinite time horizon problems, where the defining functions are nonlinear as well in the states as in the controls. As a consequence solutions can often only be found numerically. Moreover, the long run optimal solutions are mostly limit sets like equilibria or limit cycles. Using these specific solutions a BVP approach together with a continuation technique is used to calculate the parameter dependent dynamic structure of the optimal vector field. We use a one dimensional optimal control model of a fishery to exemplify the numerical techniques. But these methods are applicable to a much wider class of optimal control problems with a moderate number of state and control variables.
Optimal vector field; BVP; Continuation; Multiple optimal solutions; Threshold point;
10
2012
36
1626
1658
C02
C61
C63
http://www.sciencedirect.com/science/article/pii/S0165188912000966
Grass, D.
oai:RePEc:eee:dyncon:v:30:y:2006:i:2:p:243-2782012-12-25RePEc:eee:dyncon
article
Equilibrium consumption and precautionary savings in a stochastically growing economy
2
2006
30
2
243
278
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00019-9
Turnovsky, Stephen J.
Smith, William T.
oai:RePEc:eee:dyncon:v:13:y:1989:i:4:p:597-6122012-12-25RePEc:eee:dyncon
article
State space modeling of time series : A review essay
4
1989
13
10
597
612
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90005-5
Diebold, Francis X.
oai:RePEc:eee:dyncon:v:11:y:1987:i:1:p:93-1162012-12-25RePEc:eee:dyncon
article
Stationary uncertainty frontiers in macroeconometric models and existence and uniqueness of solutions to matrix Riccati equations
1
1987
11
3
93
116
http://www.sciencedirect.com/science/article/pii/0165-1889(87)90026-1
Le Van, Cuong
oai:RePEc:eee:dyncon:v:25:y:2001:i:11:p:1827-18402012-12-25RePEc:eee:dyncon
article
A dynamic portfolio choice model of tax evasion: Comparative statics of tax rates and its implication for economic growth
11
2001
25
11
1827
1840
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00081-0
Lin, Wen-Zhung
Yang, C. C.
oai:RePEc:eee:dyncon:v:31:y:2007:i:7:p:2486-25182012-12-25RePEc:eee:dyncon
article
Congestible public goods and local indeterminacy: A two-sector endogenous growth model
7
2007
31
7
2486
2518
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00162-X
Chen, Been-Lon
Lee, Shun-Fa
oai:RePEc:eee:dyncon:v:13:y:1989:i:4:p:569-5952012-12-25RePEc:eee:dyncon
article
The tree-cutting problem in a stochastic environment : The case of age-dependent growth
4
1989
13
10
569
595
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90004-3
Clarke, Harry R.
Reed, William J.
oai:RePEc:eee:dyncon:v:8:y:1984:i:1:p:19-322012-12-25RePEc:eee:dyncon
article
Competitive price paths of an exhaustible resource with increasing extraction costs
1
1984
8
10
19
32
http://www.sciencedirect.com/science/article/pii/0165-1889(84)90037-X
Hori, Hajime
oai:RePEc:eee:dyncon:v:13:y:1989:i:2:p:301-3112012-12-25RePEc:eee:dyncon
article
On the extrapolation method and the USA algorithm
2
1989
13
4
301
311
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90024-9
Herceg, Dragoslav
Cvetkovic, Ljiljana
oai:RePEc:eee:dyncon:v:12:y:1988:i:1:p:7-122012-12-25RePEc:eee:dyncon
article
Sector-specific capital and real exchange rate dynamics
1
1988
12
3
7
12
http://www.sciencedirect.com/science/article/pii/0165-1889(88)90008-5
Murphy, Robert G.
oai:RePEc:eee:dyncon:v:21:y:1997:i:6:p:981-10032012-12-25RePEc:eee:dyncon
article
Do CAPM results hold in a dynamic economy? A numerical analysis
6
1997
21
6
981
1003
http://www.sciencedirect.com/science/article/pii/S0165-1889(96)00014-0
Akdeniz, Levent
Dechert, W. Davis
oai:RePEc:eee:dyncon:v:36:y:2012:i:8:p:1162-11752012-12-25RePEc:eee:dyncon
article
Simulating and calibrating diversification against black swans
An investor concerned with the downside risk of a black swan only needs a small portfolio to reap the benefits from diversification. This matches actual portfolio sizes, but does contrast with received wisdom from mean–variance analysis and intuition regarding fat tailed distributed returns. The concern for downside risk and the fat tail property of the distribution of returns can explain the low portfolio diversification. A simulation and calibration study is used to demonstrate the relevance of the theory and to disentangle the relative importance of the different effects.
Portfolio diversification; Downside risk; Heavy tails; Calibration;
8
2012
36
1162
1175
G0
G1
C2
C6
http://www.sciencedirect.com/science/article/pii/S0165188912000784
Hyung, Namwon
de Vries, Casper G.
oai:RePEc:eee:dyncon:v:14:y:1990:i:3-4:p:709-7192012-12-25RePEc:eee:dyncon
article
Optimal dynamic durability
3-4
1990
14
10
709
719
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90039-J
Muller, Eitan
Peles, Yoram C.
oai:RePEc:eee:dyncon:v:30:y:2006:i:12:p:2553-25752012-12-25RePEc:eee:dyncon
article
Economic dynamics of reservoir sedimentation management: Optimal control with singularly perturbed equations of motion
12
2006
30
12
2553
2575
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00177-6
Huffaker, Ray
Hotchkiss, Rollin
oai:RePEc:eee:dyncon:v:20:y:1996:i:6-7:p:1145-11762012-12-25RePEc:eee:dyncon
article
How long is the firm's forecast horizon?
6-7
1996
20
1145
1176
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00893-4
Gordon, Stephen
oai:RePEc:eee:dyncon:v:26:y:2002:i:6:p:963-9842012-12-25RePEc:eee:dyncon
article
Trade in capital goods and investment-specific technical change
6
2002
26
6
963
984
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00005-7
Boileau, Martin
oai:RePEc:eee:dyncon:v:31:y:2007:i:4:p:1160-11842012-12-25RePEc:eee:dyncon
article
Bootstrap-based bias correction for dynamic panels
4
2007
31
4
1160
1184
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00091-1
Everaert, Gerdie
Pozzi, Lorenzo
oai:RePEc:eee:dyncon:v:19:y:1995:i:1-2:p:279-3022012-12-25RePEc:eee:dyncon
article
Stochastic saddlepoint systems Stabilization policy and the stock market
1-2
1995
19
279
302
http://www.sciencedirect.com/science/article/pii/0165-1889(93)00782-Y
Miller, Marcus
Weller, Paul
oai:RePEc:eee:dyncon:v:12:y:1988:i:1:p:181-1872012-12-25RePEc:eee:dyncon
article
Temporal risk aversion in a phased deregulation game
1
1988
12
3
181
187
http://www.sciencedirect.com/science/article/pii/0165-1889(88)90032-2
Hsu, Shih-Hsun
Stefanou, Spiro E.
oai:RePEc:eee:dyncon:v:26:y:2002:i:7-8:p:1275-12992012-12-25RePEc:eee:dyncon
article
Do we need multi-country models to explain exchange rate and interest rate and bond return dynamics?
7-8
2002
26
7
1275
1299
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00048-3
Hodrick, Robert
Vassalou, Maria
oai:RePEc:eee:dyncon:v:12:y:1988:i:2-3:p:365-3842012-12-25RePEc:eee:dyncon
article
Continuous time autoregressive models with common stochastic trends
2-3
1988
12
365
384
http://www.sciencedirect.com/science/article/pii/0165-1889(88)90046-2
Harvey, A. C.
Stock, James H.
oai:RePEc:eee:dyncon:v:14:y:1990:i:1:p:53-632012-12-25RePEc:eee:dyncon
article
Cost uncertainty and the rate of investment
1
1990
14
2
53
63
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90005-2
Zeira, Joseph
oai:RePEc:eee:dyncon:v:11:y:1987:i:3:p:285-3122012-12-25RePEc:eee:dyncon
article
On income fluctuations and capital gains with a convex production function
3
1987
11
9
285
312
http://www.sciencedirect.com/science/article/pii/S0165-1889(87)80009-X
Sotomayor, Marilda de Oliveira
oai:RePEc:eee:dyncon:v:20:y:1996:i:6-7:p:1027-10492012-12-25RePEc:eee:dyncon
article
Using cross-country variances to evaluate growth theories
6-7
1996
20
1027
1049
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00888-8
Evans, Paul
oai:RePEc:eee:dyncon:v:31:y:2007:i:11:p:3671-36982012-12-25RePEc:eee:dyncon
article
Job matching and propagation
11
2007
31
11
3671
3698
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00017-6
Fujita, Shigeru
Ramey, Garey
oai:RePEc:eee:dyncon:v:28:y:2003:i:2:p:287-3062012-12-25RePEc:eee:dyncon
article
Strong time-consistency in the cartel-versus-fringe model
2
2003
28
11
287
306
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00154-9
Groot, Fons
Withagen, Cees
de Zeeuw, Aart
oai:RePEc:eee:dyncon:v:28:y:2004:i:4:p:817-8392012-12-25RePEc:eee:dyncon
article
Asset returns in an endogenous growth model with incomplete markets
4
2004
28
1
817
839
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00062-9
Krebs, Tom
Wilson, Bonnie
oai:RePEc:eee:dyncon:v:32:y:2008:i:11:p:3682-36942012-12-25RePEc:eee:dyncon
article
On Abel's concept of doubt and pessimism
In this paper, we characterize subjective probability beliefs leading to a higher equilibrium market price of risk. We establish that Abel's result on the impact of doubt on the risk premium is not correct in general; see Abel [2002. An exploration of the effects of pessimism and doubt on asset returns. Journal of Economic Dynamics and Control 26, 1075-1092]. We introduce, on the set of subjective probability beliefs, market-price-of-risk dominance concepts and we relate them to well-known dominance concepts used for comparative statics in portfolio choice analysis. In particular, the necessary first-order conditions on subjective probability beliefs in order to increase the market price of risk for all nondecreasing utility functions appear as equivalent to the monotone likelihood ratio property.
Pessimism Optimism Doubt Stochastic dominance Risk premium Market price of risk Riskiness Portfolio dominance Monotone likelihood ratio
11
2008
32
11
3682
3694
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00053-5
Jouini, E.
Napp, C.
oai:RePEc:eee:dyncon:v:23:y:1999:i:7:p:1029-10642012-12-25RePEc:eee:dyncon
article
On the fluctuations in consumption and market returns in the presence of labor and human capital: An equilibrium analysis
7
1999
23
6
1029
1064
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00049-9
Basak, Suleyman
oai:RePEc:eee:dyncon:v:5:y:1983:i:1:p:311-3212012-12-25RePEc:eee:dyncon
article
On the equivalence of solutions in rational expectations models
1
1983
5
2
311
321
http://www.sciencedirect.com/science/article/pii/0165-1889(83)90027-1
Burmeister, Edwin
Flood, Robert P.
Garber, Peter M.
oai:RePEc:eee:dyncon:v:33:y:2009:i:3:p:649-6652012-12-25RePEc:eee:dyncon
article
Solving heterogeneous-agent models by projection and perturbation
The paper proposes a numerical solution method for general equilibrium models with a continuum of heterogeneous agents that combines elements of projection and of perturbation methods. The basic idea is to solve first for the stationary solution of the model, without aggregate shocks but with fully specified idiosyncratic shocks. Afterwards one computes a first-order perturbation of the solution in the aggregate shocks. This approach allows to include a high-dimensional representation of the cross-sectional distribution in the state vector. The method is applied to a model of household saving with uninsurable income risk and liquidity constraints. Techniques are discussed to reduce the dimension of the state space such that higher order perturbations are feasible.
Heterogeneous agents Projection methods Perturbation methods Invariant distribution
3
2009
33
3
649
665
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00152-8
Reiter, Michael
oai:RePEc:eee:dyncon:v:31:y:2007:i:2:p:399-4312012-12-25RePEc:eee:dyncon
article
Optimal monetary policy in a micro-founded model with parameter uncertainty
2
2007
31
2
399
431
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00018-2
Kimura, Takeshi
Kurozumi, Takushi
oai:RePEc:eee:dyncon:v:26:y:2002:i:2:p:171-1852012-12-25RePEc:eee:dyncon
article
Consistent expectations equilibria and learning in a stock market
2
2002
26
2
171
185
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00050-6
Sogner, Leopold
Mitlohner, Hans
oai:RePEc:eee:dyncon:v:20:y:1996:i:6-7:p:1289-13052012-12-25RePEc:eee:dyncon
article
Accounting for global warming risks: Resource management under event uncertainty
6-7
1996
20
1289
1305
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00900-0
Tsur, Yacov
Zemel, Amos
oai:RePEc:eee:dyncon:v:30:y:2006:i:12:p:2793-28222012-12-25RePEc:eee:dyncon
article
Financially constrained arbitrage in illiquid markets
12
2006
30
12
2793
2822
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00207-1
Attari, Mukarram
Mello, Antonio S.
oai:RePEc:eee:dyncon:v:21:y:1997:i:1:p:115-1432012-12-25RePEc:eee:dyncon
article
Equilibrium dynamics in two-sector models of endogenous growth
1
1997
21
1
115
143
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00927-2
Ladron-de-Guevara, Antonio
Ortigueira, Salvador
Santos, Manuel S.
oai:RePEc:eee:dyncon:v:31:y:2007:i:2:p:703-7202012-12-25RePEc:eee:dyncon
article
Long-run average welfare in a pollution accumulation model
2
2007
31
2
703
720
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00086-8
Kawaguchi, Kazuhito
Morimoto, Hiroaki
oai:RePEc:eee:dyncon:v:32:y:2008:i:1:p:156-1992012-12-25RePEc:eee:dyncon
article
Continuous cascade models for asset returns
1
2008
32
1
156
199
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00044-9
Bacry, E.
Kozhemyak, A.
Muzy, Jean-Francois
oai:RePEc:eee:dyncon:v:27:y:2003:i:11-12:p:2151-21702012-12-25RePEc:eee:dyncon
article
Inferring strategies from observed actions: a nonparametric, binary tree classification approach
11-12
2003
27
9
2151
2170
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00119-7
Engle-Warnick, Jim
oai:RePEc:eee:dyncon:v:15:y:1991:i:2:p:387-4082012-12-25RePEc:eee:dyncon
article
A dynamic model of occupational choice
2
1991
15
4
387
408
http://www.sciencedirect.com/science/article/pii/0165-1889(91)90019-W
McCall, Brian P.
oai:RePEc:eee:dyncon:v:8:y:1984:i:1:p:33-642012-12-25RePEc:eee:dyncon
article
Optimally derived fixed rules and indicators
1
1984
8
10
33
64
http://www.sciencedirect.com/science/article/pii/0165-1889(84)90038-1
Karakitsos, E.
Rustem, B.
oai:RePEc:eee:dyncon:v:28:y:2004:i:4:p:691-7062012-12-25RePEc:eee:dyncon
article
The cyclical behavior of household and business investment in a cash-in-advance economy
4
2004
28
1
691
706
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00040-X
Li, Victor E.
Chang, Chia-Ying
oai:RePEc:eee:dyncon:v:21:y:1997:i:7:p:1259-12622012-12-25RePEc:eee:dyncon
article
Growth and economic development : Siro Lombardini, (Edward Elgar, Cheltenham, Glos., UK; Brookfield, Vermont, USA) ISBN 1 85898 394 0; [UK pound]49.95
7
1997
21
6
1259
1262
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00047-X
Velupillai, K. Vela
oai:RePEc:eee:dyncon:v:31:y:2007:i:10:p:3348-33692012-12-25RePEc:eee:dyncon
article
Income taxes, public investment and welfare in a growing economy
10
2007
31
10
3348
3369
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00222-3
Marrero, Gustavo A.
Novales, Alfonso
oai:RePEc:eee:dyncon:v:20:y:1996:i:1-3:p:521-5232012-12-25RePEc:eee:dyncon
article
Rules, reputation and macroeconomic policy coordination : David Currie and Paul Levine, (Cambridge University Press, Cambridge, UK, 1993) HB[UK pound]45, 430 pp
1-3
1996
20
521
523
http://www.sciencedirect.com/science/article/pii/S0165-1889(96)90019-6
Cripps, M. W.
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:75-812012-12-25RePEc:eee:dyncon
article
Rival models in policy optimization
1-2
1986
10
6
75
81
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90021-7
Becker, R.
Dwolatzky, B.
Karakitsos, E.
Rustem, B.
oai:RePEc:eee:dyncon:v:30:y:2006:i:9-10:p:1615-16462012-12-25RePEc:eee:dyncon
article
Can social security be welfare improving when there is demographic uncertainty?
9-10
2006
30
1615
1646
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00055-8
Sanchez-Marcos, Virginia
Sanchez-Martin, Alfonso R.
oai:RePEc:eee:dyncon:v:32:y:2008:i:9:p:2788-28082012-12-25RePEc:eee:dyncon
article
A dynamic factor approach to nonlinear stability analysis
9
2008
32
9
2788
2808
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00232-1
Shintani, Mototsugu
oai:RePEc:eee:dyncon:v:32:y:2008:i:5:p:1489-15162012-12-25RePEc:eee:dyncon
article
Investment, interest rate policy, and equilibrium stability
Carlstrom and Fuerst [2005. Investment and interest rate policy: a discrete time analysis. Journal of Economic Theory 123, 4-20.] show that in the presence of investment activity and price stickiness, indeterminacy of equilibrium is induced by forward-looking monetary policy that sets the interest rate in response only to future inflation. In a stochastic version of their model, we find that this indeterminacy problem is due to a cost channel of monetary policy, whereby inflation expectations become self-fulfilling, and the problem can be overcome once the forward-looking policy responds also to current output or contains sufficiently strong interest rate smoothing, since this prevents the self-fulfilling expectations. We also show that when E-stability is adopted as the selection criterion from multiple equilibria, even the forward-looking policy generates a locally unique non-explosive E-stable fundamental rational expectations equilibrium as long as the policy response to expected future inflation is sufficiently strong.
5
2008
32
5
1489
1516
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00145-5
Kurozumi, Takushi
Van Zandweghe, Willem
oai:RePEc:eee:dyncon:v:1:y:1979:i:1:p:3-372012-12-25RePEc:eee:dyncon
article
Perturbation and robustness analysis of a closed macroeconomic model
1
1979
1
2
3
37
http://www.sciencedirect.com/science/article/pii/S0165-1889(79)80003-2
Aoki, Masanao
oai:RePEc:eee:dyncon:v:36:y:2012:i:9:p:1340-13482012-12-25RePEc:eee:dyncon
article
Two-sided intergenerational transfer policy and economic development: A politico-economic approach
We consider an overlapping generations model with public education and social security financed by labor income taxation, in which the overall size of these policies is determined in a repeated majority voting game. We investigate the interaction between these policies and economic development in stationary Markov perfect equilibria. In the politico-economic equilibrium, the labor income tax rate is represented as a linear increasing function of the ratio of the decisive voter's human capital and the average human capital level. A high level of initial income inequality reduces the size of public policies and retards economic growth.
Public education; Social security; Markov perfect equilibrium; Income inequality; Economic development;
9
2012
36
1340
1348
H55
O16
http://www.sciencedirect.com/science/article/pii/S016518891200067X
Naito, Katsuyuki
oai:RePEc:eee:dyncon:v:22:y:1998:i:3:p:465-4822012-12-25RePEc:eee:dyncon
article
Endogenous growth and the welfare costs of inflation: a reconsideration
3
1998
22
3
465
482
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00067-5
Wu, Yangru
Zhang, Junxi
oai:RePEc:eee:dyncon:v:19:y:1995:i:5-7:p:1297-12982012-12-25RePEc:eee:dyncon
article
Erratum
5-7
1995
19
1297
1298
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00830-B
Sethi, Suresh P.
Taksar, Michael I.
Presman, Ernst L.
oai:RePEc:eee:dyncon:v:29:y:2005:i:4:p:595-6002012-12-25RePEc:eee:dyncon
article
Bounded rationality, heterogeneity and market dynamics
4
2005
29
4
595
600
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00058-2
Kirman, Alan
Tuinstra, Jan
oai:RePEc:eee:dyncon:v:29:y:2005:i:9:p:1597-16092012-12-25RePEc:eee:dyncon
article
Optimal growth with pollution: how to use pollution permits?
9
2005
29
9
1597
1609
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00114-9
Jouvet, Pierre-Andre
Michel, Philippe
Rotillon, Gilles
oai:RePEc:eee:dyncon:v:25:y:2001:i:1-2:p:245-2792012-12-25RePEc:eee:dyncon
article
Simplicity versus optimality: The choice of monetary policy rules when agents must learn
1-2
2001
25
1
245
279
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00075-5
Tetlow, Robert J.
von zur Muehlen, Peter
oai:RePEc:eee:dyncon:v:28:y:2003:i:2:p:273-2852012-12-25RePEc:eee:dyncon
article
Computing sunspot equilibria in linear rational expectations models
2
2003
28
11
273
285
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00153-7
Lubik, Thomas A.
Schorfheide, Frank
oai:RePEc:eee:dyncon:v:28:y:2003:i:1:p:171-1812012-12-25RePEc:eee:dyncon
article
Expectational stability of stationary sunspot equilibria in a forward-looking linear model
1
2003
28
10
171
181
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00137-9
Evans, George W.
Honkapohja, Seppo
oai:RePEc:eee:dyncon:v:31:y:2007:i:4:p:1416-14302012-12-25RePEc:eee:dyncon
article
Stochastic optimal policies when the discount rate vanishes
4
2007
31
4
1416
1430
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00120-5
Nishimura, Kazuo
Stachurski, John
oai:RePEc:eee:dyncon:v:17:y:1993:i:1-2:p:263-2872012-12-25RePEc:eee:dyncon
article
Estimation of simultaneous equation models with stochastic trend components
1-2
1993
17
263
287
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)80012-6
Streibel, Mariane
Harvey, Andrew
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:149-1552012-12-25RePEc:eee:dyncon
article
Approximate state space models of some vector-valued macroeconomic time series for cross-country comparisons
1-2
1986
10
6
149
155
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90032-1
Aoki, Masanao
Havenner, Arthur
oai:RePEc:eee:dyncon:v:31:y:2007:i:12:p:3860-38802012-12-25RePEc:eee:dyncon
article
Intensity-based framework and penalty formulation of optimal stopping problems
12
2007
31
12
3860
3880
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00034-6
Dai, Min
Kwok, Yue Kuen
You, Hong
oai:RePEc:eee:dyncon:v:18:y:1994:i:1:p:185-2032012-12-25RePEc:eee:dyncon
article
Modifications to the subroutine OPALQP for dealing with large problems
1
1994
18
1
185
203
http://www.sciencedirect.com/science/article/pii/0165-1889(94)90075-2
Bartholomew-Biggs, M. C.
Hernandez, M. deF. G.
oai:RePEc:eee:dyncon:v:25:y:2001:i:3-4:p:419-4572012-12-25RePEc:eee:dyncon
article
Structure, behavior, and market power in an evolutionary labor market with adaptive search
3-4
2001
25
3
419
457
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00032-4
Tesfatsion, Leigh
oai:RePEc:eee:dyncon:v:33:y:2009:i:2:p:363-3762012-12-25RePEc:eee:dyncon
article
Computational modelling of price formation in the electricity pool of England and Wales
This paper develops a detailed computational model of price formation in the England and Wales electricity pool, as it operated for 11 years from 1990 to 2001. It is clear that during this period, the repeated nature of the daily auction, between a small number of generators, with a substantial amount of information in common, gave rise to a continuous evolution of learning and gaming in practice with no evidence of convergence to a stationary Nash solution. In terms of representing reality, a computational approach inspired by evolutionary economics, can succeed in reflecting well the type of behaviour observed, to an extent that cannot be matched by alternative analytical models. Cycles of pricing appear in the model, apparently as they seem to do in practice, yet average behaviour has been validated against the theoretical supply function results for the more stylised circumstances where analytical results are possible. The paper therefore makes a methodological contribution in the development of a model of competitive electricity markets inspired by computational learning and gaming. It also makes an applied contribution by providing a more realistic basis for identifying whether high market prices can be ascribed to problems of market structure or market conduct.
Auctions Electricity Computational learning Market power
2
2009
33
2
363
376
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00117-6
Bunn, Derek W.
Day, Christopher J.
oai:RePEc:eee:dyncon:v:15:y:1991:i:2:p:339-3532012-12-25RePEc:eee:dyncon
article
Exchange market intervention under multiple solutions : Should we rule out multiple solutions?
2
1991
15
4
339
353
http://www.sciencedirect.com/science/article/pii/0165-1889(91)90017-U
Fukuda, Shin-ichi
oai:RePEc:eee:dyncon:v:1:y:1979:i:1:p:59-832012-12-25RePEc:eee:dyncon
article
Optimal monetary policy with uncertainty
1
1979
1
2
59
83
http://www.sciencedirect.com/science/article/pii/S0165-1889(79)80005-6
Craine, Roger
oai:RePEc:eee:dyncon:v:28:y:2004:i:11:p:2195-22142012-12-25RePEc:eee:dyncon
article
Strategic asset allocation in a continuous-time VAR model
11
2004
28
10
2195
2214
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00203-3
Campbell, John Y.
Chacko, George
Rodriguez, Jorge
Viceira, Luis M.
oai:RePEc:eee:dyncon:v:31:y:2007:i:7:p:2461-24852012-12-25RePEc:eee:dyncon
article
Optimal harvesting under resource stock and price uncertainty
7
2007
31
7
2461
2485
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00153-9
Alvarez, Luis H.R.
Koskela, Erkki
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:89-912012-12-25RePEc:eee:dyncon
article
Optimal timing of capacity expansion
1-2
1986
10
6
89
91
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90023-0
Carvalhais, Z.
Davis, M. H. A.
oai:RePEc:eee:dyncon:v:30:y:2006:i:11:p:2217-22602012-12-25RePEc:eee:dyncon
article
Predictability and habit persistence
11
2006
30
11
2217
2260
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00154-5
Collard, Fabrice
Feve, Patrick
Ghattassi, Imen
oai:RePEc:eee:dyncon:v:19:y:1995:i:8:p:1429-14482012-12-25RePEc:eee:dyncon
article
Optimal disinflationary paths
8
1995
19
11
1429
1448
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00836-7
Ireland, Peter N.
oai:RePEc:eee:dyncon:v:27:y:2002:i:2:p:283-3012012-12-25RePEc:eee:dyncon
article
On infinite-horizon minimum-cost hedging under cone constraints
2
2002
27
12
283
301
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00037-9
Huang, Kevin X. D.
oai:RePEc:eee:dyncon:v:23:y:1999:i:4:p:641-6692012-12-25RePEc:eee:dyncon
article
Strategic behavior and noncooperative hierarchical control
4
1999
23
2
641
669
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00033-5
Weeren, A. J. T. M.
Schumacher, J. M.
Engwerda, J. C.
oai:RePEc:eee:dyncon:v:19:y:1995:i:3:p:655-6612012-12-25RePEc:eee:dyncon
article
No-trade and uniqueness of steady states
3
1995
19
4
655
661
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00797-L
Ghiglino, Christian
Tvede, Mich
oai:RePEc:eee:dyncon:v:16:y:1992:i:2:p:207-2232012-12-25RePEc:eee:dyncon
article
Irreversibility and the behavior of aggregate stochastic growth models
2
1992
16
4
207
223
http://www.sciencedirect.com/science/article/pii/0165-1889(92)90031-9
Dow, James Jr.
Olson, Lars J.
oai:RePEc:eee:dyncon:v:20:y:1996:i:1-3:p:361-3842012-12-25RePEc:eee:dyncon
article
Stochastic multi-agent equilibria in economies with jump-diffusion uncertainty
1-3
1996
20
361
384
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00855-9
Bardhan, Indrajit
Chao, Xiuli
oai:RePEc:eee:dyncon:v:31:y:2007:i:3:p:861-8862012-12-25RePEc:eee:dyncon
article
Subsidies in an R&D growth model with elastic labor
3
2007
31
3
861
886
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00043-1
Zeng, Jinli
Zhang, Jie
oai:RePEc:eee:dyncon:v:21:y:1997:i:7:p:1229-12582012-12-25RePEc:eee:dyncon
article
Multi-period information markets
7
1997
21
6
1229
1258
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00020-1
Naik, Narayan Y.
oai:RePEc:eee:dyncon:v:21:y:1997:i:4-5:p:831-8522012-12-25RePEc:eee:dyncon
article
An exact solution for the investment and value of a firm facing uncertainty, adjustment costs, and irreversibility
4-5
1997
21
5
831
852
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00005-5
Abel, Andrew B.
Eberly, Janice C.
oai:RePEc:eee:dyncon:v:31:y:2007:i:11:p:3545-35672012-12-25RePEc:eee:dyncon
article
Optimal social security in a dynastic model with investment externalities and endogenous fertility
11
2007
31
11
3545
3567
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00228-4
Zhang, Jie
Zhang, Junsen
oai:RePEc:eee:dyncon:v:14:y:1990:i:1:p:183-1852012-12-25RePEc:eee:dyncon
article
A further note on flexible least squares and Kalman filtering
1
1990
14
2
183
185
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90012-6
Kalaba, R.
Tesfatsion, L.
oai:RePEc:eee:dyncon:v:23:y:1998:i:1:p:125-1582012-12-25RePEc:eee:dyncon
article
Growth effect of taxes in an endogenous growth model: to what extent do taxes affect economic growth?
1
1998
23
9
125
158
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00111-5
Kim, Se-Jik
oai:RePEc:eee:dyncon:v:23:y:1999:i:9-10:p:1459-14852012-12-25RePEc:eee:dyncon
article
The U.S. Phillips curve: The case for asymmetry
9-10
1999
23
9
1459
1485
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00080-3
Laxton, Douglas
Rose, David
Tambakis, Demosthenes
oai:RePEc:eee:dyncon:v:36:y:2012:i:8:p:1193-12112012-12-25RePEc:eee:dyncon
article
Structural stochastic volatility in asset pricing dynamics: Estimation and model contest
In the framework of small-scale agent-based financial market models, the paper starts out from the concept of structural stochastic volatility, which derives from different noise levels in the demand of fundamentalists and chartists and the time-varying market shares of the two groups. It advances several different specifications of the endogenous switching between the trading strategies and then estimates these models by the method of simulated moments (MSMs), where the choice of the moments reflects the basic stylized facts of the daily returns of a stock market index. In addition to the standard version of MSM with a quadratic loss function, we also take into account how often a great number of Monte Carlo simulation runs happen to yield moments that are all contained within their empirical confidence intervals. The model contest along these lines reveals a strong role for a (tamed) herding component. The quantitative performance of the winner model is so good that it may provide a standard for future research.
Method of simulated moments; Moment coverage ratio; Herding; Discrete choice approach; Transition probability approach;
8
2012
36
1193
1211
D84
G12
G14
G15
http://www.sciencedirect.com/science/article/pii/S0165188912000802
Franke, Reiner
Westerhoff, Frank
oai:RePEc:eee:dyncon:v:23:y:1998:i:1:p:159-1652012-12-25RePEc:eee:dyncon
article
Characterizing sustainability: The converse of Hartwick's rule
1
1998
23
9
159
165
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00109-7
Withagen, Cees
B. Asheim, Geir
oai:RePEc:eee:dyncon:v:24:y:2000:i:4:p:483-4992012-12-25RePEc:eee:dyncon
article
Learning the optimum as a Nash equilibrium
4
2000
24
4
483
499
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00012-3
Ozyildirim, Suheyla
Alemdar, Nedim M.
oai:RePEc:eee:dyncon:v:23:y:1999:i:9-10:p:1487-15162012-12-25RePEc:eee:dyncon
article
Time series properties of an artificial stock market
9-10
1999
23
9
1487
1516
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00081-5
LeBaron, Blake
Arthur, W. Brian
Palmer, Richard
oai:RePEc:eee:dyncon:v:32:y:2008:i:1:p:259-2782012-12-25RePEc:eee:dyncon
article
A network analysis of the Italian overnight money market
1
2008
32
1
259
278
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00047-4
Iori, Giulia
De Masi, Giulia
Precup, Ovidiu Vasile
Gabbi, Giampaolo
Caldarelli, Guido
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:281-2892012-12-25RePEc:eee:dyncon
article
Monetary policy, exchange rate dynamics and the labour market
1-2
1986
10
6
281
289
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90051-5
Karakitsos, Elias
oai:RePEc:eee:dyncon:v:33:y:2009:i:2:p:454-4622012-12-25RePEc:eee:dyncon
article
Monetary equilibrium and the differentiability of the value function
In this study we offer a new approach to proving the differentiability of the value function, which complements and extends the literature on dynamic programming. This result is then applied to the analysis of equilibrium in the recent class of monetary economies developed in [Lagos, R., Wright, R., 2005. A unified framework for monetary theory and policy analysis. Journal of Political Economy 113, 463-484]. For this type of environments we demonstrate that the value function is differentiable and this guarantees that the marginal value of money balances is well defined.
Value function Optimal plans Money
2
2009
33
2
454
462
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00130-9
Aliprantis, C.D.
Camera, G.
Ruscitti, F.
oai:RePEc:eee:dyncon:v:26:y:2002:i:7-8:p:1127-11572012-12-25RePEc:eee:dyncon
article
Prices as factors: Approximate aggregation with incomplete markets
7-8
2002
26
7
1127
1157
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00050-1
Telmer, Chris I.
Zin, Stanley E.
oai:RePEc:eee:dyncon:v:26:y:2002:i:3:p:451-4812012-12-25RePEc:eee:dyncon
article
Cooperative and non-cooperative fiscal stabilization policies in the EMU
3
2002
26
3
451
481
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00056-7
Engwerda, Jacob C.
van Aarle, Bas
Plasmans, Joseph E. J.
oai:RePEc:eee:dyncon:v:12:y:1988:i:2-3:p:425-4442012-12-25RePEc:eee:dyncon
article
Common trends, the government's budget constraint, and revenue smoothing
2-3
1988
12
425
444
http://www.sciencedirect.com/science/article/pii/0165-1889(88)90048-6
Trehan, Bharat
Walsh, Carl E.
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:93-972012-12-25RePEc:eee:dyncon
article
The formulation of robust policies for rival rational expectations models of the economy
1-2
1986
10
6
93
97
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90024-2
Levine, Paul
oai:RePEc:eee:dyncon:v:18:y:1994:i:3-4:p:897-9082012-12-25RePEc:eee:dyncon
article
Estimation and inference in the linear-quadratic inventory model
3-4
1994
18
897
908
http://www.sciencedirect.com/science/article/pii/0165-1889(94)90037-X
West, Kenneth D.
Wilcox, David W.
oai:RePEc:eee:dyncon:v:24:y:2000:i:11-12:p:1721-17462012-12-25RePEc:eee:dyncon
article
Approximating payoffs and pricing formulas
11-12
2000
24
10
1721
1746
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00092-5
Darolles, Serge
Laurent, Jean-Paul
oai:RePEc:eee:dyncon:v:21:y:1997:i:10:p:1777-17802012-12-25RePEc:eee:dyncon
article
Hierarchical Decision Making in Stochastic Manufacturing Systems : S.P. Sethi and Qing Zhang, (Birkhauser, Boston, Cambridge, MA) ISBN 0-8176-3735-4
10
1997
21
8
1777
1780
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00048-1
Boukas, El-Kebir
oai:RePEc:eee:dyncon:v:32:y:2008:i:11:p:3718-37422012-12-25RePEc:eee:dyncon
article
Central bank reputation in a forward-looking model
This paper examines whether reputation concerns can induce the central bank to implement the time-inconsistent optimal monetary policy in the standard New Keynesian model. Interestingly, the forward-looking nature of this model enables us to account for the coordination of the private agents on the punishment length of their trigger strategy. Our results suggest that both the inflation bias and the stabilization bias can be overcome by a reputation-concerned central bank for the calibrations used in the literature. These results enable us to endogenize Woodford's timeless perspective and tend to weaken the case for recent monetary policy delegation proposals.
Inflation bias Monetary policy Reputation Stabilization bias Timeless perspective
11
2008
32
11
3718
3742
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00055-9
Loisel, Olivier
oai:RePEc:eee:dyncon:v:30:y:2006:i:2:p:205-2272012-12-25RePEc:eee:dyncon
article
Global patent protection: channels of north and south welfare gain
2
2006
30
2
205
227
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00017-5
Grinols, Earl
Lin, Hwan C.
oai:RePEc:eee:dyncon:v:12:y:1988:i:2-3:p:385-4232012-12-25RePEc:eee:dyncon
article
Rational-expectations econometric analysis of changes in regime : An investigation of the term structure of interest rates
2-3
1988
12
385
423
http://www.sciencedirect.com/science/article/pii/0165-1889(88)90047-4
Hamilton, James D.
oai:RePEc:eee:dyncon:v:2:y:1980:i:1:p:353-3762012-12-25RePEc:eee:dyncon
article
Chaotic dynamics and bifurcation in a macro model
1
1980
2
5
353
376
http://www.sciencedirect.com/science/article/pii/0165-1889(80)90070-6
Stutzer, Michael J.
oai:RePEc:eee:dyncon:v:18:y:1994:i:3-4:p:807-8132012-12-25RePEc:eee:dyncon
article
A note on a new class of solutions to dynamic programming problems arising in economic growth
3-4
1994
18
807
813
http://www.sciencedirect.com/science/article/pii/0165-1889(94)90032-9
Benhabib, Jess
Rustichini, Aldo
oai:RePEc:eee:dyncon:v:20:y:1996:i:6-7:p:1073-11002012-12-25RePEc:eee:dyncon
article
Heterogeneous beliefs, wealth accumulation, and asset price dynamics
6-7
1996
20
1073
1100
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00890-X
Cabrales, Antonio
Hoshi, Takeo
oai:RePEc:eee:dyncon:v:22:y:1997:i:1:p:123-1402012-12-25RePEc:eee:dyncon
article
Capacity utilization and market power
1
1997
22
11
123
140
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00050-X
Fagnart, Jean-Francois
Licandro, Omar
Sneessens, Henri R.
oai:RePEc:eee:dyncon:v:31:y:2007:i:5:p:1451-14722012-12-25RePEc:eee:dyncon
article
Optimal long-run fiscal policy: Constraints, preferences and the resolution of uncertainty
5
2007
31
5
1451
1472
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00101-1
Auerbach, Alan J.
Hassett, Kevin
oai:RePEc:eee:dyncon:v:36:y:2012:i:10:p:1566-15842012-12-25RePEc:eee:dyncon
article
Interest rate rules, endogenous cycles, and chaotic dynamics in open economies
We present an extensive analysis of the consequences for global equilibrium determinacy in flexible-price open economies of implementing active interest rate rules, i.e., monetary rules where the nominal interest rate responds more than proportionally to inflation. We show that conditions under which these rules generate aggregate instability by inducing liquidity traps, endogenous cycles, and chaotic dynamics depend on specific characteristics of open economies. In particular, rules that respond to expected future inflation are more prone to induce endogenous cyclical and chaotic dynamics the more open the economy to trade.
Small open economy; Interest rate rules; Taylor rules; Multiple equilibria; Chaos and endogenous fluctuations;
10
2012
36
1566
1584
E32
E52
F41
http://www.sciencedirect.com/science/article/pii/S0165188912001376
Airaudo, Marco
Zanna, Luis-Felipe
oai:RePEc:eee:dyncon:v:20:y:1996:i:6-7:p:1007-10252012-12-25RePEc:eee:dyncon
article
Measuring business cycles with business-cycle models
6-7
1996
20
1007
1025
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00887-X
Gregory, Allan W.
Smith, Gregor W.
oai:RePEc:eee:dyncon:v:20:y:1996:i:6-7:p:1263-12882012-12-25RePEc:eee:dyncon
article
Are taxes too low?
6-7
1996
20
1263
1288
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00899-3
Manasse, Paolo
oai:RePEc:eee:dyncon:v:21:y:1997:i:2-3:p:603-6302012-12-25RePEc:eee:dyncon
article
Optimal investment and finance in renewable resource harvesting
2-3
1997
21
603
630
http://www.sciencedirect.com/science/article/pii/S0165-1889(96)00919-0
Jorgensen, Steffen
Kort, Peter M.
oai:RePEc:eee:dyncon:v:31:y:2007:i:12:p:3822-38422012-12-25RePEc:eee:dyncon
article
Export restraints in a model of trade with capital accumulation
12
2007
31
12
3822
3842
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00025-5
Calzolari, Giacomo
Lambertini, Luca
oai:RePEc:eee:dyncon:v:20:y:1996:i:6-7:p:1051-10712012-12-25RePEc:eee:dyncon
article
Hybrid algorithms with automatic switching for solving nonlinear equation systems
6-7
1996
20
1051
1071
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00889-6
Hallett, A. Hughes
Ma, Y.
Yin, Y. P.
oai:RePEc:eee:dyncon:v:14:y:1990:i:3-4:p:553-5692012-12-25RePEc:eee:dyncon
article
When does coordination pay?
3-4
1990
14
10
553
569
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90033-D
Miller, Marcus
Salmon, Mark
oai:RePEc:eee:dyncon:v:28:y:2003:i:2:p:331-3482012-12-25RePEc:eee:dyncon
article
Welfare effects of controlling labor supply: an application of the stochastic Ramsey model
2
2003
28
11
331
348
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00167-7
Amilon, Henrik
Bermin, Hans-Peter
oai:RePEc:eee:dyncon:v:31:y:2007:i:7:p:2168-21952012-12-25RePEc:eee:dyncon
article
Dynamic portfolio selection with fixed and/or proportional transaction costs using non-singular stochastic optimal control theory
7
2007
31
7
2168
2195
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00140-0
Chellathurai, Thamayanthi
Draviam, Thangaraj
oai:RePEc:eee:dyncon:v:28:y:2004:i:6:p:1159-11842012-12-25RePEc:eee:dyncon
article
Path-dependence in a Ramsey model with resource amenities and limited regeneration
6
2004
28
3
1159
1184
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00078-2
Gerlagh, Reyer
Keyzer, Michiel A.
oai:RePEc:eee:dyncon:v:14:y:1990:i:2:p:329-3732012-12-25RePEc:eee:dyncon
article
Money as a medium of exchange in an economy with artificially intelligent agents
2
1990
14
5
329
373
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90025-C
Marimon, Ramon
McGrattan, Ellen
Sargent, Thomas J.
oai:RePEc:eee:dyncon:v:4:y:1982:i:1:p:295-3012012-12-25RePEc:eee:dyncon
article
Dilemmas with infinitesimal magnitudes : The case of resource depletion problem
1
1982
4
11
295
301
http://www.sciencedirect.com/science/article/pii/0165-1889(82)90018-5
Kasanen, Eero
oai:RePEc:eee:dyncon:v:27:y:2003:i:3:p:503-5312012-12-25RePEc:eee:dyncon
article
Dynamics of beliefs and learning under aL-processes -- the heterogeneous case
3
2003
27
1
503
531
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00059-8
Chiarella, Carl
He, Xue-Zhong
oai:RePEc:eee:dyncon:v:22:y:1998:i:8-9:p:1235-12742012-12-25RePEc:eee:dyncon
article
Heterogeneous beliefs and routes to chaos in a simple asset pricing model
8-9
1998
22
8
1235
1274
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00011-6
Brock, William A.
Hommes, Cars H.
oai:RePEc:eee:dyncon:v:12:y:1988:i:2-3:p:505-5222012-12-25RePEc:eee:dyncon
article
Interpreting cointegrated models
2-3
1988
12
505
522
http://www.sciencedirect.com/science/article/pii/0165-1889(88)90053-X
Campbell, John Y.
Shiller, Robert J.
oai:RePEc:eee:dyncon:v:25:y:2001:i:9:p:1451-14562012-12-25RePEc:eee:dyncon
article
Recursive macroeconomic theory, Lars Ljungqvist and Thomas J. Sargent; The MIT Press, Cambridge, MA, 2000, pp. 737, $60.
9
2001
25
9
1451
1456
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00019-7
Den Haan, Wouter J.
oai:RePEc:eee:dyncon:v:28:y:2004:i:6:p:1115-11482012-12-25RePEc:eee:dyncon
article
Optimal consumption-portfolio choices and retirement planning
6
2004
28
3
1115
1148
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00068-X
Bodie, Zvi
Detemple, Jerome B.
Otruba, Susanne
Walter, Stephan
oai:RePEc:eee:dyncon:v:28:y:2004:i:4:p:801-8152012-12-25RePEc:eee:dyncon
article
How many cake-eaters? Chouette, on a du monde a diner !
4
2004
28
1
801
815
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00061-7
Favard, Pascal
Karp, Larry
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:291-2952012-12-25RePEc:eee:dyncon
article
Decomposition of the international consequences of policies into world and difference effects Application to the fair multi-country model
1-2
1986
10
6
291
295
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90052-7
Laffargue, Jean-Pierre
oai:RePEc:eee:dyncon:v:30:y:2006:i:9-10:p:1441-14442012-12-25RePEc:eee:dyncon
article
Computing in economics and finance
9-10
2006
30
1441
1444
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00049-2
Bullard, Jim
Diks, Cees
Wagener, Florian
oai:RePEc:eee:dyncon:v:23:y:1999:i:8:p:1225-12422012-12-25RePEc:eee:dyncon
article
Government spending, endogenous labor, and capital accumulation
8
1999
23
8
1225
1242
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00062-1
Chang, Wen-ya
oai:RePEc:eee:dyncon:v:27:y:2003:i:4:p:533-5492012-12-25RePEc:eee:dyncon
article
Functional equivalence between intertemporal and multisectoral investment adjustment costs
4
2003
27
2
533
549
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00060-4
Kim, Jinill
oai:RePEc:eee:dyncon:v:19:y:1995:i:4:p:787-8112012-12-25RePEc:eee:dyncon
article
Equilibrium asset prices and exchange rates
4
1995
19
5
787
811
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00804-Q
Zapatero, Fernando
oai:RePEc:eee:dyncon:v:18:y:1994:i:2:p:353-3802012-12-25RePEc:eee:dyncon
article
Limit cycles in intertemporal adjustment models : Theory and applications
2
1994
18
3
353
380
http://www.sciencedirect.com/science/article/pii/0165-1889(94)90013-2
Feichtinger, Gustav
Novak, Andreas
Wirl, Franz
oai:RePEc:eee:dyncon:v:36:y:2012:i:9:p:1414-14302012-12-25RePEc:eee:dyncon
article
Maximin, viability and sustainability
The maximin criterion defines the highest utility level that can be sustained in an intergenerational equity perspective. The viability approach makes it possible to characterize all the economic trajectories sustaining a given, not necessarily maximal, utility level. In this paper, we exhibit the strong links between maximin and viability: we show that the value function of the maximin problem can be obtained in the viability framework, and that the maximin path is a particular viable path. This result allows us to extend the recommendations of the maximin approach beyond optimality, to characterize the sustainability of economic trajectories which differ from the maximin path. Attention is especially paid to non-negative net investment at maximin accounting prices, which is shown to be necessary to maintain the productive capacity of the economy, whether the development path is optimal or not. Our results provide a new theoretical ground to account for sustainability in imperfect economies, based on maximin prices.
Sustainability; Maximin; Viability; Dynamics; Optimality; Genuine savings;
9
2012
36
1414
1430
C61
E21
Q01
Q56
http://www.sciencedirect.com/science/article/pii/S0165188912000668
Doyen, L.
Martinet, V.
oai:RePEc:eee:dyncon:v:13:y:1989:i:2:p:151-1692012-12-25RePEc:eee:dyncon
article
The optimal lag selection and transfer function analysis in Granger causality tests
2
1989
13
4
151
169
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90015-8
Kang, Heejoon
oai:RePEc:eee:dyncon:v:31:y:2007:i:2:p:473-4912012-12-25RePEc:eee:dyncon
article
Global bifurcations, credit rationing and recurrent hyperinflations
2
2007
31
2
473
491
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00020-0
Gomis-Porqueras, Pere
Haro, Alex
oai:RePEc:eee:dyncon:v:13:y:1989:i:2:p:283-3002012-12-25RePEc:eee:dyncon
article
An algorithm for Ramsey pricing by multiproduct public firms under incomplete information
2
1989
13
4
283
300
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90023-7
Currier, Kevin M.
oai:RePEc:eee:dyncon:v:13:y:1989:i:3:p:471-4832012-12-25RePEc:eee:dyncon
article
The utility of manufacturing cooperatives
3
1989
13
7
471
483
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90033-X
Tapiero, Charles S.
oai:RePEc:eee:dyncon:v:17:y:1993:i:5-6:p:759-7692012-12-25RePEc:eee:dyncon
article
Devil's staircase and chaos from macroeconomic mode interaction
5-6
1993
17
759
769
http://www.sciencedirect.com/science/article/pii/0165-1889(93)90013-I
Larsen, Erik Reimer
Morecroft, John D. W.
Thomsen, Jesper Skovhus
Mosekilde, Erik
oai:RePEc:eee:dyncon:v:18:y:1994:i:6:p:1051-10682012-12-25RePEc:eee:dyncon
article
A recursive forward simulation method for solving nonlinear rational expectations models
6
1994
18
11
1051
1068
http://www.sciencedirect.com/science/article/pii/0165-1889(94)90047-7
Imrohoroglu, Selahattin
oai:RePEc:eee:dyncon:v:5:y:1983:i:1:p:235-2472012-12-25RePEc:eee:dyncon
article
Asymptotic distribution of power spectra and peak frequencies in the stochastic response of econometric models
1
1983
5
2
235
247
http://www.sciencedirect.com/science/article/pii/0165-1889(83)90023-4
Calzolari, Giorgio
oai:RePEc:eee:dyncon:v:9:y:1985:i:4:p:363-4042012-12-25RePEc:eee:dyncon
article
A method for estimating the timing interval in a linear econometric model, with an application to Taylor's model of staggered contracts
4
1985
9
12
363
404
http://www.sciencedirect.com/science/article/pii/0165-1889(85)90012-0
Christiano, Lawrence J.
oai:RePEc:eee:dyncon:v:32:y:2008:i:8:p:2398-24272012-12-25RePEc:eee:dyncon
article
A dynamic new Keynesian life-cycle model: Societal aging, demographics, and monetary policy
8
2008
32
8
2398
2427
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00197-2
Fujiwara, Ippei
Teranishi, Yuki
oai:RePEc:eee:dyncon:v:24:y:2000:i:2:p:247-2722012-12-25RePEc:eee:dyncon
article
On the transition from local regular to global irregular fluctuations
2
2000
24
2
247
272
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00071-2
Pintus, Patrick
Sands, Duncan
de Vilder, Robin
oai:RePEc:eee:dyncon:v:19:y:1995:i:3:p:569-5972012-12-25RePEc:eee:dyncon
article
Arbitrage pricing and the stochastic inflation tax in a multisector monetary economy
3
1995
19
4
569
597
http://www.sciencedirect.com/science/article/pii/0165-1889(93)00771-U
Reffett, Kevin L.
oai:RePEc:eee:dyncon:v:8:y:1984:i:2:p:137-1492012-12-25RePEc:eee:dyncon
article
Information structure and stochastic control performance
2
1984
8
11
137
149
http://www.sciencedirect.com/science/article/pii/0165-1889(84)90030-7
Norman, Alfred Lorn
oai:RePEc:eee:dyncon:v:36:y:2012:i:10:p:1448-14612012-12-25RePEc:eee:dyncon
article
Cycles in nonrenewable resource prices with pollution and learning-by-doing
We study how environmental regulation in the form of a cap on aggregate emissions from a fossil fuel (e.g., coal) interacts with the arrival of a clean substitute (e.g., solar energy). The cost of the substitute is assumed to decrease with cumulative use because of learning-by-doing. We show that optimal energy prices may initially increase because of pollution regulation, but fall due to learning, and rise again because of scarcity of the resource, finally falling after transition to the clean substitute. Thus nonrenewable resource prices may exhibit cyclical behavior even in a purely deterministic setting.
Climate change; Energy markets; Environmental externalities; Nonrenewable resources; Technological change;
10
2012
36
1448
1461
http://www.sciencedirect.com/science/article/pii/S0165188912000954
Chakravorty, Ujjayant
Leach, Andrew
Moreaux, Michel
oai:RePEc:eee:dyncon:v:32:y:2008:i:7:p:2118-21362012-12-25RePEc:eee:dyncon
article
Production management, output volatility, and good luck
This paper models the scale of the technology shocks as a decision variable whose value is determined by the production manager. It is shown that smaller shocks enhance profit in several ways and thus the firm has an incentive to adopt more reliable production technologies. The adoption of these technologies may account for the "good luck" hypothesis in which the stabilization of Gross Domestic Product (GDP) since 1984 is attributed to smaller shocks. It differs from this hypothesis in two respects. First, the reduced volatility should be permanent. Second, the stabilization does not require smaller intrinsic shocks to the economy.
7
2008
32
7
2118
2136
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00194-7
Bivin, David G.
oai:RePEc:eee:dyncon:v:28:y:2003:i:1:p:141-1512012-12-25RePEc:eee:dyncon
article
The simple analytics of optimal growth with illegal migrants
1
2003
28
10
141
151
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00133-1
Hazari, Bharat R.
Sgro, Pasquale M.
oai:RePEc:eee:dyncon:v:26:y:2002:i:6:p:919-9362012-12-25RePEc:eee:dyncon
article
Why present-oriented societies undergo cycles of drug epidemics
6
2002
26
6
919
936
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00003-3
Behrens, Doris A.
Caulkins, Jonathan P.
Tragler, Gernot
Feichtinger, Gustav
oai:RePEc:eee:dyncon:v:31:y:2007:i:12:p:3904-39402012-12-25RePEc:eee:dyncon
article
A monetary business cycle model with unemployment
12
2007
31
12
3904
3940
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00037-1
Alexopoulos, Michelle
oai:RePEc:eee:dyncon:v:32:y:2008:i:10:p:3166-31912012-12-25RePEc:eee:dyncon
article
Optimal interest rate stabilization in a basic sticky-price model
10
2008
32
10
3166
3191
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00014-6
Paustian, Matthias
Stoltenberg, Christian
oai:RePEc:eee:dyncon:v:26:y:2002:i:6:p:1053-10682012-12-25RePEc:eee:dyncon
article
Productive consumption, the intertemporal consumption trade-off and growth
6
2002
26
6
1053
1068
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00009-4
Steger, Thomas M.
oai:RePEc:eee:dyncon:v:36:y:2012:i:8:p:1101-11202012-12-25RePEc:eee:dyncon
article
Individual expectations, limited rationality and aggregate outcomes
Recent studies suggest that the type of strategic environment or expectation feedback can have a large impact on whether the market can learn the rational fundamental price. We present an experiment where the fundamental price experiences large unexpected shocks. Markets with negative expectation feedback (strategic substitutes) quickly converge to the new fundamental, while markets with positive expectation feedback (strategic complements) do not converge, but show underreaction in the short run and overreaction in the long run. A simple evolutionary selection model of individual learning explains these differences in aggregate outcomes.
Expectation feedback; Under and overreaction; Strategic substitutes and strategic complements; Heuristic switching model; Experimental economics;
8
2012
36
1101
1120
C92
G14
D84
D83
E37
http://www.sciencedirect.com/science/article/pii/S0165188912000772
Bao, Te
Hommes, Cars
Sonnemans, Joep
Tuinstra, Jan
oai:RePEc:eee:dyncon:v:5:y:1983:i:1:p:173-1852012-12-25RePEc:eee:dyncon
article
Optimal currency diversification for a class of risk-averse international investors
1
1983
5
2
173
185
http://www.sciencedirect.com/science/article/pii/0165-1889(83)90020-9
de Macedo, Jorge Braga
oai:RePEc:eee:dyncon:v:32:y:2008:i:11:p:3661-36812012-12-25RePEc:eee:dyncon
article
Adaptive learning and the use of forecasts in monetary policy
This paper investigates monetary policy design when central bank and private-sector expectations differ. Private agents learn adaptively; the central bank has a possibly misspecified model of the economy. Successful implementation of optimal policy using inflation targeting rules requires the central bank to have complete knowledge of private agents' learning behavior. If the central bank mistakenly assumes private agents to have rational expectations when in fact they are learning, then policy rules frequently lead to divergent learning dynamics. However, if the central bank does not correctly understand agents' behavior, stabilization policy is best implemented by controlling the path of the price level rather than the inflation rate.
Adaptive learning Monetary policy Targeting rules
11
2008
32
11
3661
3681
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00052-3
Preston, Bruce
oai:RePEc:eee:dyncon:v:16:y:1992:i:2:p:267-2872012-12-25RePEc:eee:dyncon
article
Strategic dynamic interaction : Fish wars
2
1992
16
4
267
287
http://www.sciencedirect.com/science/article/pii/0165-1889(92)90034-C
Fischer, Ronald D.
Mirman, Leonard J.
oai:RePEc:eee:dyncon:v:31:y:2007:i:4:p:1132-11592012-12-25RePEc:eee:dyncon
article
A computational scheme for optimal investment - consumption with proportional transaction costs
4
2007
31
4
1132
1159
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00090-X
Muthuraman, Kumar
oai:RePEc:eee:dyncon:v:14:y:1990:i:2:p:237-2532012-12-25RePEc:eee:dyncon
article
The design of decentralized auction mechanisms that coordinate continuous trade in synthetic securities
2
1990
14
5
237
253
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90019-D
Miller, Ross M.
oai:RePEc:eee:dyncon:v:36:y:2012:i:8:p:1088-11002012-12-25RePEc:eee:dyncon
article
Rollover risk, network structure and systemic financial crises
The breakdown of short-term funding markets was a key feature of the global financial crisis of 2007/2008. Drawing on ideas from global games and network growth, we show how network topology interacts with the funding structure of financial institutions to determine system-wide crises. Bad news about a financial institution can lead others to lose confidence in it and their withdrawals, in turn, trigger problems across the interbank network. Once broken, credit relations take a long time to re-establish as a result of common knowledge of the equilibrium. Our findings shed light on public policy responses during and after the crisis.
Interbank networks; Credit crisis; Liquidity freeze;
8
2012
36
1088
1100
C72
G01
G21
http://www.sciencedirect.com/science/article/pii/S0165188912000760
Anand, Kartik
Gai, Prasanna
Marsili, Matteo
oai:RePEc:eee:dyncon:v:20:y:1996:i:5:p:879-9042012-12-25RePEc:eee:dyncon
article
Employment cycles in search equilibrium
5
1996
20
5
879
904
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00880-2
Fanizza, Domenico
oai:RePEc:eee:dyncon:v:19:y:1995:i:1-2:p:303-3252012-12-25RePEc:eee:dyncon
article
Efficiency and optimality in stochastic models with production
1-2
1995
19
303
325
http://www.sciencedirect.com/science/article/pii/0165-1889(93)00783-Z
Bertocchi, Graziella
Kehagias, Athanasios
oai:RePEc:eee:dyncon:v:31:y:2007:i:4:p:1106-11312012-12-25RePEc:eee:dyncon
article
Controlled stochastic differential equations under Poisson uncertainty and with unbounded utility
4
2007
31
4
1106
1131
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00089-3
Sennewald, Ken
oai:RePEc:eee:dyncon:v:20:y:1996:i:1-3:p:281-3132012-12-25RePEc:eee:dyncon
article
Impatience and long-run growth
1-3
1996
20
281
313
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00852-3
Drugeon, Jean-Pierre
oai:RePEc:eee:dyncon:v:2:y:1980:i:1:p:395-3962012-12-25RePEc:eee:dyncon
article
Models and decision making in national economies : J.M.L. Janssen, L.F. Pau and A. Straszak, (North-Holland, Amsterdam, 1979)
1
1980
2
5
395
396
http://www.sciencedirect.com/science/article/pii/0165-1889(80)90072-X
Kalman, R. E.
oai:RePEc:eee:dyncon:v:11:y:1987:i:4:p:499-5112012-12-25RePEc:eee:dyncon
article
Joint production of substitutable, exhaustible resources, or: Is flaring gas rational?
4
1987
11
12
499
511
http://www.sciencedirect.com/science/article/pii/S0165-1889(87)80003-9
Wirl, Franz
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:37-392012-12-25RePEc:eee:dyncon
article
Dynamic advertising and pricing in an oligopology A Nash equilibrium approach
1-2
1986
10
6
37
39
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90014-X
Dockner, Engelbert
Feichtinger, Gustav
oai:RePEc:eee:dyncon:v:28:y:2004:i:8:p:1661-16802012-12-25RePEc:eee:dyncon
article
Dynamic taxes and quotas with learning
8
2004
28
6
1661
1680
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00082-4
Costello, Christopher
Karp, Larry
oai:RePEc:eee:dyncon:v:31:y:2007:i:5:p:1498-15342012-12-25RePEc:eee:dyncon
article
Fiscal policy in unionized labor markets
5
2007
31
5
1498
1534
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00117-5
Ardagna, Silvia
oai:RePEc:eee:dyncon:v:14:y:1990:i:1:p:97-1162012-12-25RePEc:eee:dyncon
article
Credibility and the value of information transmission in a model of monetary policy and inflation
1
1990
14
2
97
116
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90008-5
Basar, Tamer
Salmon, Mark
oai:RePEc:eee:dyncon:v:21:y:1997:i:2-3:p:575-6022012-12-25RePEc:eee:dyncon
article
Optimal management of an R&D budget
2-3
1997
21
575
602
http://www.sciencedirect.com/science/article/pii/S0165-1889(96)00945-1
Dutta, Prajit K.
oai:RePEc:eee:dyncon:v:32:y:2008:i:11:p:3631-36602012-12-25RePEc:eee:dyncon
article
Analytic solving of asset pricing models: The by force of habit case
Analytic methods for solving asset pricing models are developed to solve asset pricing models. Campbell and Cochrane's [1999. By force of habit, a consumption-based explanation of aggregate stock market behavior. Journal of Political Economy 107, 205-251] habit persistence model provides a prototypical example to illustrate this method. When the parameters involved satisfy certain conditions, the integral equation of this model has a solution in the space of continuous functions that grows exponentially at infinity. However, the parameters advocated by Campbell and Cochrane do not satisfy one of these conditions. The existence problem is removed by restricting the price-dividend function to avoid values of dividend growth that are extreme. Thus, existence and uniqueness of the solution in the space of continuous and bounded functions is proved. Using complex analysis the price-dividend function is also shown to be analytic in a region large enough to cover all relevant values of dividend growth. Next, a numerical method is presented for computing higher order polynomial approximations of the solution. Finally, a uniform upper bound on the error of these approximations is derived. An intensive search of the parameter space results in no parameter values for which the solution matches the historic equity premium and Sharpe ratio within Campbell and Cochrane's model.
Analyticity Asset pricing Habit
11
2008
32
11
3631
3660
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00051-1
Chen, Yu
Cosimano, Thomas F.
Himonas, Alex A.
oai:RePEc:eee:dyncon:v:12:y:1988:i:1:p:173-1792012-12-25RePEc:eee:dyncon
article
The reliability of control experiments : Comparison of the sources of error
1
1988
12
3
173
179
http://www.sciencedirect.com/science/article/pii/0165-1889(88)90031-0
Brillet, Jean-Louis
Laurent, Jean-Paul
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:33-362012-12-25RePEc:eee:dyncon
article
On the computation of equilibria in discounted stochastic dynamic games
1-2
1986
10
6
33
36
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90013-8
Breton, Michele
Haurie, Alain
Filar, Jerzy A.
oai:RePEc:eee:dyncon:v:23:y:1998:i:3:p:333-3692012-12-25RePEc:eee:dyncon
article
A direct discrete-time approach to Poisson-Gaussian bond option pricing in the Heath-Jarrow-Morton model
3
1998
23
11
333
369
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00031-1
Das, Sanjiv Ranjan
oai:RePEc:eee:dyncon:v:31:y:2007:i:4:p:1217-12442012-12-25RePEc:eee:dyncon
article
Pricing home mortgages and bank collateral: A rational expectations approach
4
2007
31
4
1217
1244
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00093-5
Ebrahim, M. Shahid
Mathur, Ike
oai:RePEc:eee:dyncon:v:36:y:2012:i:9:p:1303-13212012-12-25RePEc:eee:dyncon
article
Lifetime investment and consumption using a defined-contribution pension scheme
During the accumulation phase of a defined-contribution pension scheme, a scheme member invests part of their stochastic income in a portfolio of a stock and a bond in order to build up sufficient funds for retirement. It is assumed that the remainder of their salary pre-retirement is consumed, an annuity is purchased at retirement, and the stock allocation and consumption pre-retirement maximise the total expected lifetime consumption using a CARA utility function. Perfect correlation between the scheme member's income and the stock price leads to analytical expressions for the controls for a general income model. If the correlation is imperfect then analytical controls are found for two particular stochastic income models.
Defined-contribution pension; Lifecycle model; Stochastic income; Replacement ratio;
9
2012
36
1303
1321
C61
D31
D52
D91
http://www.sciencedirect.com/science/article/pii/S0165188912000279
Emms, Paul
oai:RePEc:eee:dyncon:v:26:y:2002:i:7-8:p:1243-12742012-12-25RePEc:eee:dyncon
article
Short rate nonlinearities and regime switches
7-8
2002
26
7
1243
1274
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00042-2
Ang, Andrew
Bekaert, Geert
oai:RePEc:eee:dyncon:v:12:y:1988:i:2-3:p:333-3462012-12-25RePEc:eee:dyncon
article
Cointegration and stock prices : The random walk on wall street revisited
2-3
1988
12
333
346
http://www.sciencedirect.com/science/article/pii/0165-1889(88)90044-9
Cerchi, Marlene
Havenner, Arthur
oai:RePEc:eee:dyncon:v:32:y:2008:i:9:p:2809-28252012-12-25RePEc:eee:dyncon
article
Staggered updating in an artificial financial market
9
2008
32
9
2809
2825
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00233-3
Georges, Christophre
oai:RePEc:eee:dyncon:v:14:y:1990:i:3-4:p:763-7952012-12-25RePEc:eee:dyncon
article
Periodic linear-quadratic methods for modeling seasonality
3-4
1990
14
10
763
795
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90042-F
Todd, Richard M.
oai:RePEc:eee:dyncon:v:7:y:1984:i:3:p:233-2402012-12-25RePEc:eee:dyncon
article
The treatment of registered retirement savings plans at maturity
3
1984
7
9
233
240
http://www.sciencedirect.com/science/article/pii/0165-1889(84)90018-6
Daly, Michael J.
Naqib, Fadle
oai:RePEc:eee:dyncon:v:30:y:2006:i:9-10:p:1729-17532012-12-25RePEc:eee:dyncon
article
A dynamic analysis of moving average rules
9-10
2006
30
1729
1753
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00060-1
Chiarella, Carl
He, Xue-Zhong
Hommes, Cars
oai:RePEc:eee:dyncon:v:36:y:2012:i:8:p:1121-11412012-12-25RePEc:eee:dyncon
article
Liaisons dangereuses: Increasing connectivity, risk sharing, and systemic risk
The recent financial crisis poses the challenge to understand how systemic risk arises endogenously and what architecture can make the financial system more resilient to global crises. This paper shows that a financial network can be most resilient for intermediate levels of risk diversification, and not when this is maximal, as generally thought so far. This finding holds in the presence of the financial accelerator, i.e. when negative variations in the financial robustness of an agent tend to persist in time because they have adverse effects on the agent's subsequent performance through the reaction of the agent's counterparties.
Systemic risk; Network models; Contagion; Financial acceleration; Financial crisis;
8
2012
36
1121
1141
D85
G01
G21
http://www.sciencedirect.com/science/article/pii/S0165188912000899
Battiston, Stefano
Delli Gatti, Domenico
Gallegati, Mauro
Greenwald, Bruce
Stiglitz, Joseph E.
oai:RePEc:eee:dyncon:v:30:y:2006:i:8:p:1431-14402012-12-25RePEc:eee:dyncon
article
Equity premium with distorted beliefs: A puzzle
8
2006
30
8
1431
1440
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00135-1
Misina, Miroslav
oai:RePEc:eee:dyncon:v:27:y:2003:i:4:p:645-6502012-12-25RePEc:eee:dyncon
article
Portable random number generators
4
2003
27
2
645
650
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00065-3
Dwyer, Gerald Jr.
Williams, K. B.
oai:RePEc:eee:dyncon:v:36:y:2012:i:10:p:1551-15652012-12-25RePEc:eee:dyncon
article
Decreasing and increasing marginal impatience and the terms of trade in an interdependent world economy
Using a two-good, two-country model, we examine macroeconomic adjustment by allowing for decreasing and increasing marginal impatience (DMI and IMI). In the reference case where both countries have IMI, a negative output shock in one country lowers the interest rate and both countries' welfare levels in steady state, whereas, when either one country has DMI, the negative income shock raises the interest rate, thereby benefiting the IMI country and harming the DMI one in steady state. In a country either with IMI or DMI, the Harberger–Laursen–Metzler effect takes place if negative ‘welfare-supporting’ effects dominate positive ‘income-compensating’ effects.
Decreasing (increasing) marginal impatience; Two-country economy; Terms of trade; Current account;
10
2012
36
1551
1565
F41
F32
E00
http://www.sciencedirect.com/science/article/pii/S0165188912000929
Hirose, Ken-Ichi
Ikeda, Shinsuke
oai:RePEc:eee:dyncon:v:20:y:1996:i:1-3:p:43-622012-12-25RePEc:eee:dyncon
article
On the stability of an adjustment process for spatial price equilibrium modeled as a projected dynamical system
1-3
1996
20
43
62
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00843-2
Nagurney, Anna
Zhang, Ding
oai:RePEc:eee:dyncon:v:11:y:1987:i:2:p:249-2542012-12-25RePEc:eee:dyncon
article
Time-domain robustness criteria for large-scale economic systems
2
1987
11
6
249
254
http://www.sciencedirect.com/science/article/pii/0165-1889(87)90016-9
Petkovski, Djordjija B.
oai:RePEc:eee:dyncon:v:32:y:2008:i:12:p:3820-38462012-12-25RePEc:eee:dyncon
article
A class of asset pricing models governed by subordinate processes that signal economic shocks
We consider a mean-reverting risk-neutral short rate process model with a vector of subordinated drift processes that accounts for the random effect of the arrival of new information. It is assumed that the market is efficient with no arbitrage opportunities. Closed form expressions for the price in nominal and in real terms of a discount bond are obtained. We define a risk-neutral exchange rate model with correlated subordinated drift and volatility processes that reflect the effect of the arrival of new information pertaining to the countries involved. The cases of complete and incomplete exchange markets with no arbitrage opportunities are considered.
Mean reverting Ito process Stochastic volatility Economic shock process Risk premia Stochastic interest rate Risk-neutral process Subordinated processes Brownian motion models Foreign exchange markets Incomplete/complete markets
12
2008
32
12
3820
3846
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00061-4
Jagannathan, Raj
oai:RePEc:eee:dyncon:v:27:y:2003:i:4:p:551-5722012-12-25RePEc:eee:dyncon
article
Optimal transition to backstop substitutes for nonrenewable resources
4
2003
27
2
551
572
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00061-6
Tsur, Yacov
Zemel, Amos
oai:RePEc:eee:dyncon:v:13:y:1989:i:3:p:319-3372012-12-25RePEc:eee:dyncon
article
Two-stage optimal control problems with an explicit switch point dependence : Optimality criteria and an example of delivery lags and investment
3
1989
13
7
319
337
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90027-4
Tomiyama, Ken
Rossana, Robert J.
oai:RePEc:eee:dyncon:v:28:y:2003:i:3:p:531-5532012-12-25RePEc:eee:dyncon
article
Simulation-based exact jump tests in models with conditional heteroskedasticity
3
2003
28
12
531
553
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00034-4
Khalaf, Lynda
Saphores, Jean-Daniel
Bilodeau, Jean-Francois
oai:RePEc:eee:dyncon:v:31:y:2007:i:11:p:3644-36702012-12-25RePEc:eee:dyncon
article
The protection of intellectual property rights and endogenous growth: Is stronger always better?
11
2007
31
11
3644
3670
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00016-4
Furukawa, Yuichi
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:297-2982012-12-25RePEc:eee:dyncon
article
Was it real? The exchange rate -- Interest differential relation: 1973-1984
1-2
1986
10
6
297
298
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90053-9
Meese, Richard
Rogoff, Kenneth
oai:RePEc:eee:dyncon:v:27:y:2003:i:10:p:1917-19382012-12-25RePEc:eee:dyncon
article
Stability, chaos and multiple attractors: a single agent makes a difference
10
2003
27
8
1917
1938
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00090-8
Onozaki, Tamotsu
Sieg, Gernot
Yokoo, Masanori
oai:RePEc:eee:dyncon:v:22:y:1998:i:3:p:483-4872012-12-25RePEc:eee:dyncon
article
Handbook of computational economics : H.M. Amman, D.A. Kendrick, J. Rust, (eds.), vol. 1. North-Holland, Amsterdam, 1996, pp. xxi + 827, $163.75/265.0 Dutch Guilders. (ISBN 0-444-89857-3)
3
1998
22
3
483
487
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00094-8
McAdam, Peter
oai:RePEc:eee:dyncon:v:28:y:2004:i:8:p:1681-17012012-12-25RePEc:eee:dyncon
article
Altruism, intergenerational transfers of time and bequests
8
2004
28
6
1681
1701
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00095-2
Cardia, Emanuela
Michel, Philippe
oai:RePEc:eee:dyncon:v:30:y:2006:i:2:p:293-3222012-12-25RePEc:eee:dyncon
article
The effectiveness of Keynes-Tobin transaction taxes when heterogeneous agents can trade in different markets: A behavioral finance approach
2
2006
30
2
293
322
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00034-5
Westerhoff, Frank H.
Dieci, Roberto
oai:RePEc:eee:dyncon:v:26:y:2002:i:6:p:1029-10522012-12-25RePEc:eee:dyncon
article
Existence of stationary equilibrium in the markets for new and used durable goods
6
2002
26
6
1029
1052
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00008-2
Konishi, Hideo
Sandfort, Michael T.
oai:RePEc:eee:dyncon:v:31:y:2007:i:2:p:515-5302012-12-25RePEc:eee:dyncon
article
Computing second-order-accurate solutions for rational expectation models using linear solution methods
2
2007
31
2
515
530
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00022-4
Lombardo, Giovanni
Sutherland, Alan
oai:RePEc:eee:dyncon:v:31:y:2007:i:6:p:1910-19372012-12-25RePEc:eee:dyncon
article
How does learning affect market liquidity? A simulation analysis of a double-auction financial market with portfolio traders
6
2007
31
6
1910
1937
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00005-X
Consiglio, Andrea
Russino, Annalisa
oai:RePEc:eee:dyncon:v:26:y:2002:i:3:p:437-4492012-12-25RePEc:eee:dyncon
article
Hartwick's rule and economic conservation laws
3
2002
26
3
437
449
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00055-5
Sato, Ryuzo
Kim, Youngduk
oai:RePEc:eee:dyncon:v:20:y:1996:i:1-3:p:479-5192012-12-25RePEc:eee:dyncon
article
Do open market operations matter? Theory and evidence from the Second Bank of the United States
1-3
1996
20
479
519
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00861-4
Highfield, Richard A.
O'Hara, Maureen
Smith, Bruce
oai:RePEc:eee:dyncon:v:27:y:2003:i:4:p:573-5972012-12-25RePEc:eee:dyncon
article
Profits, markups and entry: fiscal policy in an open economy
4
2003
27
2
573
597
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00062-8
Coto-Martinez, Javier
Dixon, Huw
oai:RePEc:eee:dyncon:v:25:y:2001:i:1-2:p:85-1132012-12-25RePEc:eee:dyncon
article
Transitional dynamics in a two-sector non-scale growth model
1-2
2001
25
1
85
113
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00070-6
Eicher, Theo S.
Turnovsky, Stephen J.
oai:RePEc:eee:dyncon:v:28:y:2003:i:2:p:209-2532012-12-25RePEc:eee:dyncon
article
Optimal consumption and investment strategies with a perishable and an indivisible durable consumption good
2
2003
28
11
209
253
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00135-5
Damgaard, Anders
Fuglsbjerg, Brian
Munk, Claus
oai:RePEc:eee:dyncon:v:25:y:2001:i:1-2:p:115-1482012-12-25RePEc:eee:dyncon
article
Inflation targeting with NAIRU uncertainty and endogenous policy credibility
1-2
2001
25
1
115
148
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00071-8
Isard, Peter
Laxton, Douglas
Eliasson, Ann-Charlotte
oai:RePEc:eee:dyncon:v:29:y:2005:i:8:p:1331-13602012-12-25RePEc:eee:dyncon
article
Heterogeneous borrowers, liquidity, and the search for credit
8
2005
29
8
1331
1360
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00095-8
Becsi, Zsolt
Li, Victor E.
Wang, Ping
oai:RePEc:eee:dyncon:v:30:y:2006:i:2:p:163-1832012-12-25RePEc:eee:dyncon
article
Production experiences and market structure in R&D competition
2
2006
30
2
163
183
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00006-0
Chang, Shun-Chiao
Wu, Ho-Mou
oai:RePEc:eee:dyncon:v:23:y:1999:i:9-10:p:1329-13532012-12-25RePEc:eee:dyncon
article
Solving higher-dimensional continuous-time stochastic control problems by value function regression
9-10
1999
23
9
1329
1353
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00076-1
Reiter, Michael
oai:RePEc:eee:dyncon:v:30:y:2006:i:9-10:p:1647-16692012-12-25RePEc:eee:dyncon
article
A new statistic and practical guidelines for nonparametric Granger causality testing
9-10
2006
30
1647
1669
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00056-X
Diks, Cees
Panchenko, Valentyn
oai:RePEc:eee:dyncon:v:31:y:2007:i:6:p:1801-18072012-12-25RePEc:eee:dyncon
article
Advances in experimental and agent-based modelling: Asset markets, economic networks, computational mechanism design and evolutionary game dynamics
6
2007
31
6
1801
1807
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00085-1
Markose, Sheri
Arifovic, Jasmina
Sunder, Shyam
oai:RePEc:eee:dyncon:v:19:y:1995:i:5-7:p:1065-10892012-12-25RePEc:eee:dyncon
article
Consistency and cautious fictitious play
5-7
1995
19
1065
1089
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00819-4
Fudenberg, Drew
Levine, David K.
oai:RePEc:eee:dyncon:v:8:y:1984:i:3:p:265-2752012-12-25RePEc:eee:dyncon
article
On recalls, layoffs, variable hours, and labor adjustment costs
3
1984
8
12
265
275
http://www.sciencedirect.com/science/article/pii/0165-1889(84)90007-1
Barron, John M.
Loewenstein, Mark A.
Black, Dan A.
oai:RePEc:eee:dyncon:v:27:y:2003:i:11-12:p:2007-20342012-12-25RePEc:eee:dyncon
article
Information technologies, embodiment and growth
11-12
2003
27
9
2007
2034
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00114-8
Boucekkine, Raouf
de la Croix, David
oai:RePEc:eee:dyncon:v:19:y:1995:i:8:p:1449-14692012-12-25RePEc:eee:dyncon
article
Continuous time vs. backward induction a new approach to modelling reputation in the finite time horizon context
8
1995
19
11
1449
1469
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00837-8
Conlon, John R.
oai:RePEc:eee:dyncon:v:15:y:1991:i:3:p:425-4532012-12-25RePEc:eee:dyncon
article
Further results on asset pricing with incomplete information
3
1991
15
7
425
453
http://www.sciencedirect.com/science/article/pii/0165-1889(91)90001-H
Detemple, Jerome B.
oai:RePEc:eee:dyncon:v:32:y:2008:i:12:p:3917-39382012-12-25RePEc:eee:dyncon
article
Information shocks and precautionary saving
Skinner's [1988. Risky income, life cycle consumption, and precautionary savings. Journal of Monetary Economics 22, 237-255] second-order approximation to the consumption function under CRRA utility is generalized to accommodate any structure of uninsurable income risk. To second order, a future income shock will induce precautionary saving in the present that depends on the variance of the expectation of the income shock at each intervening period. However, the expected rate of consumption growth depends only on the currently perceived variance of the expected present value of future income. In a finite-horizon model, precautionary saving produces a hump-shaped lifecycle profile of mean consumption primarily because the variance of future income decreases with age, but the lifecycle dynamics of total wealth also affect the shape of the profile. For a Markov income process with autocorrelations on the order of 0.9 or less, the second-order approximation performs surprisingly well for common parameter choices from the literature, but it does poorly as the autocorrelation approaches 1.
Precautionary saving Timing of revelation of information Euler equation Consumption growth Consumption hump Lifecycle model
12
2008
32
12
3917
3938
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00073-0
Feigenbaum, James
oai:RePEc:eee:dyncon:v:33:y:2009:i:2:p:296-3162012-12-25RePEc:eee:dyncon
article
Robustifying learnability
In recent years, the learnability of rational expectations equilibria (REE) and determinacy of economic structures have rightfully joined the usual performance criteria among the sought-after goals of policy design. Some contributions to the literature, including Bullard and Mitra [2002. Learning about monetary policy rules. Journal of Monetary Economics 49 (6), 1105-1139] and Evans and Honkapohja [2006. Monetary Policy, Expectations, and Commitment, Scandinavian Journal of Economics 108, 15-38], have made significant headway in establishing certain features of monetary policy rules that facilitate learning. However a treatment of policy design for learnability in worlds where agents have potentially misspecified their learning models has yet to surface. This paper provides such a treatment. We begin with the notion that because the profession has yet to settle on a consensus model of the economy, it is unreasonable to expect private agents to have collective rational expectations. We assume that agents have only an approximate understanding of the workings of the economy and that their learning the reduced forms of the economy is subject to potentially destabilizing perturbations. The issue is then whether a central bank can design policy to account for perturbations and still assure the learnability of the model. We provide two examples one of which-the canonical New Keynesian business cycle model-serves as a test case. For different parameterizations of a given policy rule, we use structured singular value analysis (from robust control theory) to find the largest ranges of misspecifications that can be tolerated in a learning model without compromising convergence to an REE. In addition, we study the cost, in terms of performance in the steady state of a central bank that acts to robustify learnability on the transition path to REE.
Monetary policy Learning E-stability Learnability Robust control
2
2009
33
2
296
316
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00103-6
Tetlow, Robert J.
von zur Muehlen, Peter
oai:RePEc:eee:dyncon:v:30:y:2006:i:9-10:p:1687-17062012-12-25RePEc:eee:dyncon
article
Are European business cycles close enough to be just one?
9-10
2006
30
1687
1706
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00058-3
Camacho, Maximo
Perez-Quiros, Gabriel
Saiz, Lorena
oai:RePEc:eee:dyncon:v:32:y:2008:i:10:p:3192-32172012-12-25RePEc:eee:dyncon
article
A patent race in a real options setting: Investment strategy, valuation, CAPM beta, and return volatility
10
2008
32
10
3192
3217
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00015-8
Meng, Rujing
oai:RePEc:eee:dyncon:v:29:y:2005:i:10:p:1737-17642012-12-25RePEc:eee:dyncon
article
Dynamic asset pricing theory with uncertain time-horizon
10
2005
29
10
1737
1764
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00120-4
Blanchet-Scalliet, Christophette
El Karoui, Nicole
Martellini, Lionel
oai:RePEc:eee:dyncon:v:27:y:2002:i:2:p:271-2812012-12-25RePEc:eee:dyncon
article
Indeterminacy in a dynamic small open economy
2
2002
27
12
271
281
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00036-7
Nishimura, Kazuo
Shimomura, Koji
oai:RePEc:eee:dyncon:v:22:y:1998:i:7:p:1001-10262012-12-25RePEc:eee:dyncon
article
Consumption and portfolio turnpike theorems in a continuous-time finance model1
7
1998
22
5
1001
1026
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00091-2
Jin, Xing
oai:RePEc:eee:dyncon:v:25:y:2001:i:3-4:p:395-4172012-12-25RePEc:eee:dyncon
article
Evolutionary dynamics of currency substitution
3-4
2001
25
3
395
417
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00031-2
Arifovic, Jasmina
oai:RePEc:eee:dyncon:v:28:y:2004:i:5:p:915-9352012-12-25RePEc:eee:dyncon
article
The American put under transactions costs
5
2004
28
2
915
935
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00099-X
Perrakis, Stylianos
Lefoll, Jean
oai:RePEc:eee:dyncon:v:32:y:2008:i:5:p:1381-13982012-12-25RePEc:eee:dyncon
article
Imperfect competition, general equilibrium and unemployment
We analyze whether different learning abilities of firms with respect to general equilibrium effects lead to different levels of unemployment. We consider a general equilibrium model, where firms in one sector compete a la Cournot and a real wage rigidity leads to unemployment. If firms consider only partial equilibrium effects when choosing quantities, the observation of general equilibrium feedback effects will lead to repeated quantity adjustments until a steady state is reached. When labor is mobile across industries, unemployment in the steady state is higher than when all general equilibrium effects are incorporated at once. The opposite result is true if labor is immobile.
5
2008
32
5
1381
1398
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00131-5
Gersbach, Hans
Schniewind, Achim
oai:RePEc:eee:dyncon:v:31:y:2007:i:12:p:3941-39642012-12-25RePEc:eee:dyncon
article
Factor taxation and labor supply in a dynamic one-sector growth model
12
2007
31
12
3941
3964
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00051-6
Chen, Been-Lon
oai:RePEc:eee:dyncon:v:31:y:2007:i:11:p:3568-35902012-12-25RePEc:eee:dyncon
article
Simple market protocols for efficient risk sharing
11
2007
31
11
3568
3590
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00013-9
LiCalzi, Marco
Pellizzari, Paolo
oai:RePEc:eee:dyncon:v:3:y:1981:i:1:p:1-272012-12-25RePEc:eee:dyncon
article
The optimality of socialist development strategies an empirical inquiry
1
1981
3
11
1
27
http://www.sciencedirect.com/science/article/pii/0165-1889(81)90001-4
Brada, Josef C.
King, Arthur E.
Schlagenhauf, Don E.
oai:RePEc:eee:dyncon:v:36:y:2012:i:8:p:1176-11922012-12-25RePEc:eee:dyncon
article
Animal spirits in the foreign exchange market
It is traditionally assumed in finance models that the fundamental value of an asset is known with certainty. In this paper we depart from that assumption. We propose a simple model of the exchange rate in which agents have biased and unbiased beliefs about the fundamental rate. We show that such a model produces waves of optimism and pessimism unrelated to the underlying fundamental value. In addition, the model shows that in a world characterized by the existence of heterogeneous beliefs about the fundamental, exchange rate movements can be remarkably complex even if only fundamentalist traders operate in the market.
Foreign exchange market; Behavioral finance; Uncertainty about fundamentals;
8
2012
36
1176
1192
F31
C62
http://www.sciencedirect.com/science/article/pii/S0165188912000796
De Grauwe, Paul
Rovira Kaltwasser, Pablo
oai:RePEc:eee:dyncon:v:24:y:2000:i:11-12:p:1641-17012012-12-25RePEc:eee:dyncon
article
Valuation and martingale properties of shadow prices: An exposition
11-12
2000
24
10
1641
1701
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00090-1
Foldes, Lucien
oai:RePEc:eee:dyncon:v:24:y:2000:i:2:p:219-2252012-12-25RePEc:eee:dyncon
article
On the investment-uncertainty relationship in a real options model
2
2000
24
2
219
225
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00005-6
Sarkar, Sudipto
oai:RePEc:eee:dyncon:v:30:y:2006:i:9-10:p:1707-17272012-12-25RePEc:eee:dyncon
article
Inflation dynamics and the New Keynesian Phillips Curve: An identification robust econometric analysis
9-10
2006
30
1707
1727
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00059-5
Dufour, Jean-Marie
Khalaf, Lynda
Kichian, Maral
oai:RePEc:eee:dyncon:v:26:y:2002:i:6:p:1009-10272012-12-25RePEc:eee:dyncon
article
Monopoly with endogenous durability
6
2002
26
6
1009
1027
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00007-0
Fethke, Gary
Jagannathan, Raj
oai:RePEc:eee:dyncon:v:36:y:2012:i:10:p:1477-14972012-12-25RePEc:eee:dyncon
article
Nonlinear and stable perturbation-based approximations
Users of regular higher-order perturbation approximations can face two problems: policy functions with odd oscillations and simulated data that explode. We propose a perturbation-based approximation that (i) does not have odd shapes, (ii) generates stable time paths, and (iii) avoids the drawbacks that hamper the pruned perturbation approach of Kim et al. (2008). For models with nontrivial nonlinearities, we find that our alternative and the pruned perturbation approximations give a good qualitative insight in the nonlinear aspects of the true solution, but can differ from the true solution in some quantitative aspects, especially during severe peaks and troughs.
Accuracy; Nonlinear numerical solutions;
10
2012
36
1477
1497
C63
E21
http://www.sciencedirect.com/science/article/pii/S0165188912001078
Den Haan, Wouter J.
De Wind, Joris
oai:RePEc:eee:dyncon:v:1:y:1979:i:1:p:39-582012-12-25RePEc:eee:dyncon
article
Stabilization policies for united states feed grain and livestock markets
1
1979
1
2
39
58
http://www.sciencedirect.com/science/article/pii/S0165-1889(79)80004-4
Arzac, Enrique R.
Wilkinson, Maurice
oai:RePEc:eee:dyncon:v:28:y:2003:i:1:p:117-1402012-12-25RePEc:eee:dyncon
article
Adaptive expectations coordination in an economy with heterogeneous agents
1
2003
28
10
117
140
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00109-4
Negroni, Giorgio
oai:RePEc:eee:dyncon:v:18:y:1994:i:2:p:317-3442012-12-25RePEc:eee:dyncon
article
Turnpikes and computation of piecewise open-loop equilibria in stochastic differential games
2
1994
18
3
317
344
http://www.sciencedirect.com/science/article/pii/0165-1889(94)90011-6
Haurie, Alain
Roche, Michel
oai:RePEc:eee:dyncon:v:20:y:1996:i:6-7:p:1115-11432012-12-25RePEc:eee:dyncon
article
Variations in risk and fluctuations in demand: A theoretical model
6-7
1996
20
1115
1143
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00892-6
Hassler, John A. A.
oai:RePEc:eee:dyncon:v:13:y:1989:i:3:p:449-4702012-12-25RePEc:eee:dyncon
article
On some computational aspects of equilibrium business cycle theory
3
1989
13
7
449
470
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90032-8
Danthine, Jean-Pierre
Donaldson, John B.
Mehra, Rajnish
oai:RePEc:eee:dyncon:v:30:y:2006:i:11:p:2305-23382012-12-25RePEc:eee:dyncon
article
Building up social capital in a changing world
11
2006
30
11
2305
2338
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00157-0
Vega-Redondo, Fernando
oai:RePEc:eee:dyncon:v:21:y:1997:i:10:p:1669-16972012-12-25RePEc:eee:dyncon
article
Optimal policy in a model of endogenous fluctuations and assets
10
1997
21
8
1669
1697
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00040-7
Taub, B.
oai:RePEc:eee:dyncon:v:19:y:1995:i:5-7:p:1033-10642012-12-25RePEc:eee:dyncon
article
The transfer of human capital
5-7
1995
19
1033
1064
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00818-3
Jovanovic, Boyan
Nyarko, Yaw
oai:RePEc:eee:dyncon:v:31:y:2007:i:8:p:2744-27732012-12-25RePEc:eee:dyncon
article
What do `residuals' from first-order conditions reveal about DGE models?
8
2007
31
8
2744
2773
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00180-1
Johri, Alok
Letendre, Marc-Andre
oai:RePEc:eee:dyncon:v:28:y:2004:i:6:p:1079-11132012-12-25RePEc:eee:dyncon
article
A geometric approach to multiperiod mean variance optimization of assets and liabilities
6
2004
28
3
1079
1113
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00067-8
Leippold, Markus
Trojani, Fabio
Vanini, Paolo
oai:RePEc:eee:dyncon:v:24:y:2000:i:5-7:p:1121-11442012-12-25RePEc:eee:dyncon
article
Critical debt and debt dynamics
5-7
2000
24
6
1121
1144
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00039-1
Semmler, Willi
Sieveking, Malte
oai:RePEc:eee:dyncon:v:16:y:1992:i:3-4:p:601-6202012-12-25RePEc:eee:dyncon
article
The effects of incomplete insurance markets and trading costs in a consumption-based asset pricing model
3-4
1992
16
601
620
http://www.sciencedirect.com/science/article/pii/0165-1889(92)90051-F
Heaton, John
Lucas, Deborah
oai:RePEc:eee:dyncon:v:32:y:2008:i:1:p:85-1002012-12-25RePEc:eee:dyncon
article
Inter-pattern speculation: Beyond minority, majority and $-games
1
2008
32
1
85
100
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00041-3
Challet, Damien
oai:RePEc:eee:dyncon:v:23:y:1999:i:4:p:519-5372012-12-25RePEc:eee:dyncon
article
Optimal growth when tastes are inherited
4
1999
23
2
519
537
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00028-1
Croix, David de la
Michel, Philippe
oai:RePEc:eee:dyncon:v:31:y:2007:i:11:p:3478-35022012-12-25RePEc:eee:dyncon
article
Pricing of path-dependent American options by Monte Carlo simulation
11
2007
31
11
3478
3502
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00226-0
Fujiwara, Hajime
Kijima, Masaaki
oai:RePEc:eee:dyncon:v:27:y:2003:i:11-12:p:2171-21932012-12-25RePEc:eee:dyncon
article
Gaining the competitive edge using internal and external spillovers: a dynamic analysis
11-12
2003
27
9
2171
2193
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00120-3
Bischi, G. -I.
Dawid, H.
Kopel, M.
oai:RePEc:eee:dyncon:v:20:y:1996:i:1-3:p:471-4772012-12-25RePEc:eee:dyncon
article
Distribution of bankruptcy time in a consumption/portfolio problem
1-3
1996
20
471
477
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00860-2
Presman, E.
Sethi, S.
oai:RePEc:eee:dyncon:v:30:y:2006:i:12:p:2749-27742012-12-25RePEc:eee:dyncon
article
Sticky prices, fair wages, and the co-movements of unemployment and labor productivity growth
12
2006
30
12
2749
2774
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00195-8
Tripier, Fabien
oai:RePEc:eee:dyncon:v:22:y:1997:i:1:p:67-862012-12-25RePEc:eee:dyncon
article
A new look at optimal growth under uncertainty
1
1997
22
11
67
86
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00042-0
Amir, Rabah
oai:RePEc:eee:dyncon:v:11:y:1987:i:2:p:229-2342012-12-25RePEc:eee:dyncon
article
On the minimax Lyapunov stabilization of uncertain economies
2
1987
11
6
229
234
http://www.sciencedirect.com/science/article/pii/0165-1889(87)90013-3
Deissenberg, Christophe
oai:RePEc:eee:dyncon:v:8:y:1984:i:2:p:151-1652012-12-25RePEc:eee:dyncon
article
Combining competing forecasts of inflation using a bivariate arch model
2
1984
8
11
151
165
http://www.sciencedirect.com/science/article/pii/0165-1889(84)90031-9
Engle, Robert F.
Granger, C. W. J.
Kraft, Dennis
oai:RePEc:eee:dyncon:v:5:y:1983:i:1:p:201-2342012-12-25RePEc:eee:dyncon
article
Adaptive strategies of the firm through a business cycle
1
1983
5
2
201
234
http://www.sciencedirect.com/science/article/pii/0165-1889(83)90022-2
Leban, Raymond
Lesourne, Jacques
oai:RePEc:eee:dyncon:v:26:y:2002:i:7-8:p:1159-11932012-12-25RePEc:eee:dyncon
article
Economic implications of using a mean-VaR model for portfolio selection: A comparison with mean-variance analysis
7-8
2002
26
7
1159
1193
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00041-0
Alexander, Gordon J.
Baptista, Alexandre M.
oai:RePEc:eee:dyncon:v:15:y:1991:i:3:p:515-5382012-12-25RePEc:eee:dyncon
article
Nonconvexities in a stochastic control problem with learning
3
1991
15
7
515
538
http://www.sciencedirect.com/science/article/pii/0165-1889(91)90004-K
Mizrach, Bruce
oai:RePEc:eee:dyncon:v:26:y:2002:i:6:p:937-9612012-12-25RePEc:eee:dyncon
article
Moving horizon control in dynamic games
6
2002
26
6
937
961
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00004-5
van den Broek, W. A.
oai:RePEc:eee:dyncon:v:30:y:2006:i:12:p:2661-26702012-12-25RePEc:eee:dyncon
article
A clarification of the Goodwin model of the growth cycle
12
2006
30
12
2661
2670
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00181-8
Desai, Meghnad
Henry, Brian
Mosley, Alexander
Pemberton, Malcolm
oai:RePEc:eee:dyncon:v:13:y:1989:i:3:p:421-4482012-12-25RePEc:eee:dyncon
article
Exploration information and AEC regulation of the domestic uranium industry
3
1989
13
7
421
448
http://www.sciencedirect.com/science/article/pii/0165-1889(89)90031-6
Mason, Charles F.
oai:RePEc:eee:dyncon:v:14:y:1990:i:2:p:465-4902012-12-25RePEc:eee:dyncon
article
Qualitative reasoning in economics
2
1990
14
5
465
490
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90030-K
Farley, Arthur M.
Lin, Kuan-Pin
oai:RePEc:eee:dyncon:v:33:y:2009:i:1:p:15-362012-12-25RePEc:eee:dyncon
article
Saddlepoint approximations for affine jump-diffusion models
Affine jump-diffusion (AJD) processes constitute a large and widely used class of continuous-time asset pricing models that balance tractability and flexibility in matching market data. The prices of e.g., bonds, options, and other assets in AJD models are given by extended pricing transforms that have an exponential-affine form; these transforms have been characterized in great generality by Duffie et al. [2000. Transform analysis and asset pricing for affine jump-diffusions. Econometrica 68, 1343-1376]. Calculating model prices requires inversion of these transforms, and this has limited the application of AJD models to the comparatively small subclass for which the transforms are available in closed form. This article seeks to widen the scope of AJD models amenable to practical application through approximate transform inversion techniques. More specifically, we develop the use of saddlepoint approximations for AJD models. These approximations facilitate the calculation of prices in AJD models whose transforms are not available explicitly. We derive and test several alternative saddlepoint approximations and find that they produce accurate prices over a wide range of parameters.
Transform inversion Characteristic function Option prices Numerical approximations
1
2009
33
1
15
36
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00079-1
Glasserman, Paul
Kim, Kyoung-Kuk
oai:RePEc:eee:dyncon:v:26:y:2002:i:6:p:911-9182012-12-25RePEc:eee:dyncon
article
Does productive capital affect the order of resource exploitation?
6
2002
26
6
911
918
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00002-1
Favard, Pascal
oai:RePEc:eee:dyncon:v:20:y:1996:i:5:p:963-9662012-12-25RePEc:eee:dyncon
article
A note on cointegration and control
5
1996
20
5
963
966
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00884-5
Ferreira, Eva
Regulez, Marta
oai:RePEc:eee:dyncon:v:33:y:2009:i:3:p:745-7572012-12-25RePEc:eee:dyncon
article
Intergenerational human capital evolution, local public good preferences, and stratification
This paper considers heterogeneities in preferences over the local public good, human capital formation, and residential locations as primary underlying forces of economic stratification in an endogenously growing economy. We construct a two-period overlapping-generations model with two regions and various forms of human capital externalities where altruistic agents determine intertemporal allocation of time, investment in a child's education and residential location. We fully characterize a balanced growth equilibrium with no migration across generations to elaborate on how changes in preference, human capital accumulation, production, and interregional commuting parameters may affect the equilibrium stratification outcome in the long run.
Economic stratification Human capital evolution and income growth Local public good and taxes
3
2009
33
3
745
757
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00166-8
Chen, Been-Lon
Peng, Shin-Kun
Wang, Ping
oai:RePEc:eee:dyncon:v:32:y:2008:i:11:p:3441-34582012-12-25RePEc:eee:dyncon
article
An analysis of fiscal policy with endogenous investment-specific technological change
The effects of distortional fiscal policies are studied within a model in which there is endogenous investment-specific technological change. Labor is used in the production of output and also for research purposes. Labor or capital taxes then distort the trade-off between developing new technologies, and investing in existing types of capital. It is shown that if there is an externality in the research activity, then it may be socially optimal to impose both a capital tax, and an investment tax credit. The growth rate is shown to be increasing in the rate of capital taxation and decreasing in the rate of labor taxation, although the effect of taxation on the growth rate is modest. This supports the observation that there is relatively little relationship between growth rates of economies, and their rates of taxation.
Investment-specific technological change Investment tax credit Optimal taxation Capital taxation Endogenous growth Externalities
11
2008
32
11
3441
3458
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00033-X
Huffman, Gregory W.
oai:RePEc:eee:dyncon:v:30:y:2006:i:12:p:2875-29042012-12-25RePEc:eee:dyncon
article
A Hotelling model with a ceiling on the stock of pollution
12
2006
30
12
2875
2904
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00210-1
Chakravorty, Ujjayant
Magne, Bertrand
Moreaux, Michel
oai:RePEc:eee:dyncon:v:10:y:1986:i:3:p:395-4142012-12-25RePEc:eee:dyncon
article
Existence and transversality conditions for a general unbounded-horizon model of the mining firm
3
1986
10
9
395
414
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90004-7
Toman, Michael A.
oai:RePEc:eee:dyncon:v:31:y:2007:i:6:p:1808-18432012-12-25RePEc:eee:dyncon
article
Forecasting volatility and volume in the Tokyo Stock Market: Long memory, fractality and regime switching
6
2007
31
6
1808
1843
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00002-4
Lux, Thomas
Kaizoji, Taisei
oai:RePEc:eee:dyncon:v:30:y:2006:i:9-10:p:1445-14892012-12-25RePEc:eee:dyncon
article
Optimal taxation in an RBC model: A linear-quadratic approach
9-10
2006
30
1445
1489
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00050-9
Benigno, Pierpaolo
Woodford, Michael
oai:RePEc:eee:dyncon:v:26:y:2002:i:7-8:p:1195-12152012-12-25RePEc:eee:dyncon
article
A direct test for the mean variance efficiency of a portfolio
7-8
2002
26
7
1195
1215
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00044-6
Basak, Gopal
Jagannathan, Ravi
Sun, Guoqiang
oai:RePEc:eee:dyncon:v:32:y:2008:i:7:p:2085-21172012-12-25RePEc:eee:dyncon
article
Gains from international monetary policy coordination: Does it pay to be different?
In a two country world where each country has a traded and a non-traded sector and each sector has sticky prices, optimal independent policy in general cannot replicate the natural-rate allocations. There are potential welfare gains from coordination since the planner under a cooperating regime internalizes a terms-of-trade externality that independent policymakers overlook. If the countries have symmetric trading structures, however, the gains from coordination are quantitatively small. With asymmetric trading structures, the gains can be sizable since, in addition to internalizing the terms-of-trade externality, the planner optimally engineers a terms-of-trade bias that favors the country with a larger traded sector.
7
2008
32
7
2085
2117
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00192-3
Liu, Zheng
Pappa, Evi
oai:RePEc:eee:dyncon:v:22:y:1997:i:1:p:49-662012-12-25RePEc:eee:dyncon
article
Dynamic optimization and forward looking processes
1
1997
22
11
49
66
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00041-9
Cannarsa, Piermarco
Giannini, Massimo
Tessitore, Maria Elisabetta
oai:RePEc:eee:dyncon:v:28:y:2004:i:5:p:861-8872012-12-25RePEc:eee:dyncon
article
A multiperiod binomial model for pricing options in a vague world
5
2004
28
2
861
887
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00060-5
Muzzioli, Silvia
Torricelli, Costanza
oai:RePEc:eee:dyncon:v:25:y:2001:i:11:p:1841-18652012-12-25RePEc:eee:dyncon
article
On optimal portfolio choice under stochastic interest rates
11
2001
25
11
1841
1865
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00005-1
Lioui, Abraham
Poncet, Patrice
oai:RePEc:eee:dyncon:v:19:y:1995:i:1-2:p:155-1792012-12-25RePEc:eee:dyncon
article
Cycles and chaos in a socialist economy
1-2
1995
19
155
179
http://www.sciencedirect.com/science/article/pii/0165-1889(93)00778-3
Hommes, Cars H.
Nusse, Helena E.
Simonovits, Andras
oai:RePEc:eee:dyncon:v:12:y:1988:i:2-3:p:489-5022012-12-25RePEc:eee:dyncon
article
The convergence of multivariate unit root distributions to their asymptotic limits : The case of money-income causality
2-3
1988
12
489
502
http://www.sciencedirect.com/science/article/pii/0165-1889(88)90052-8
Ljungqvist, Lars
Park, Myungsoo
Stock, James H.
Watson, Mark W.
oai:RePEc:eee:dyncon:v:1:y:1979:i:4:p:305-3202012-12-25RePEc:eee:dyncon
article
Imperfect price adjustment and the optimal assignment of monetary and fiscal policies
4
1979
1
11
305
320
http://www.sciencedirect.com/science/article/pii/S0165-1889(79)90182-9
Gertler, Mark
oai:RePEc:eee:dyncon:v:29:y:2005:i:6:p:1025-10412012-12-25RePEc:eee:dyncon
article
Repeated real options: optimal investment behaviour and a good rule of thumb
6
2005
29
6
1025
1041
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00083-1
Malchow-Moller, Nikolaj
Thorsen, Bo Jellesmark
oai:RePEc:eee:dyncon:v:3:y:1981:i:1:p:329-3412012-12-25RePEc:eee:dyncon
article
The existence and properties of a stationary distribution for unemployment when job search is sequential
1
1981
3
11
329
341
http://www.sciencedirect.com/science/article/pii/0165-1889(81)90025-7
Feigin, Paul
Landsberger, Michael
oai:RePEc:eee:dyncon:v:33:y:2009:i:4:p:798-8162012-12-25RePEc:eee:dyncon
article
Structural estimation of real options models
We propose a numerical approach for structural estimation of a class of discrete (Markov) decision processes emerging in real options applications. The approach is specifically designed to account for two typical features of aggregate data sets in real options: the endogeneity of firms' decisions; the unobserved heterogeneity of firms. The approach extends the nested fixed point algorithm by Rust [1987. Optimal replacement of GMC bus engines: an empirical model of Harold Zurcher. Econometrica 55(5), 999-1033; 1988. Maximum likelihood estimation of discrete control processes. SIAM Journal of Control and Optimization 26(5), 1006-1024] because both the nested optimization algorithm and the integration over the distribution of the unobserved heterogeneity are accommodated using a simulation method based on a polynomial approximation of the value function and on recursive least squares estimation of the coefficients. The Monte Carlo study shows that omitting unobserved heterogeneity produces a significant estimation bias because the model can be highly non-linear with respect to the parameters.
Real options Markov decision processes Discrete decision processes Monte Carlo methods
4
2009
33
4
798
816
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00178-4
Gamba, Andrea
Tesser, Matteo
oai:RePEc:eee:dyncon:v:24:y:2000:i:2:p:189-2172012-12-25RePEc:eee:dyncon
article
Learning dynamics, genetic algorithms, and corporate takeovers
2
2000
24
2
189
217
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00004-4
Noe, Thomas H.
Pi, Lynn
oai:RePEc:eee:dyncon:v:11:y:1987:i:1:p:123-1452012-12-25RePEc:eee:dyncon
article
Inefficiency of credible strategies in oligopolistic resource markets with uncertainty
1
1987
11
3
123
145
http://www.sciencedirect.com/science/article/pii/0165-1889(87)90028-5
Van Der Ploeg, F.
oai:RePEc:eee:dyncon:v:32:y:2008:i:4:p:1204-12112012-12-25RePEc:eee:dyncon
article
Global stability of unique Nash equilibrium in Cournot oligopoly and rent-seeking game
A sufficient condition is derived for the global stability of a unique interior Nash equilibrium in an aggregative game. The condition is applied to investigate the global stability of the Nash-Cournot equilibrium in Cournot oligopoly without product differentiation and that of the Nash equilibrium in rent-seeking games.
4
2008
32
4
1204
1211
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00123-6
Okuguchi, Koji
Yamazaki, Takeshi
oai:RePEc:eee:dyncon:v:26:y:2002:i:6:p:889-9092012-12-25RePEc:eee:dyncon
article
Robust portfolio selection using linear-matrix inequalities
6
2002
26
6
889
909
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00086-5
Costa, O. L. V.
Paiva, A. C.
oai:RePEc:eee:dyncon:v:20:y:1996:i:4:p:681-6892012-12-25RePEc:eee:dyncon
article
Interpreting a stochastic monetary growth model as a modified social planner's problem
4
1996
20
4
681
689
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00870-5
Salyer, Kevin D.
oai:RePEc:eee:dyncon:v:23:y:1998:i:1:p:97-1122012-12-25RePEc:eee:dyncon
article
Attitudes toward the timing of resolution of uncertainty and the existence of recursive utility
1
1998
23
9
97
112
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00112-7
Ma, Chenghu
oai:RePEc:eee:dyncon:v:36:y:2012:i:8:p:1212-12282012-12-25RePEc:eee:dyncon
article
Improving the value at risk forecasts: Theory and evidence from the financial crisis
The recent financial crisis has raised numerous questions about the accuracy of value-at-risk (VaR) as a tool to quantify extreme losses. In this paper we develop data-driven VaR approaches that are based on the principle of optimal combination and that provide robust and precise VaR forecasts for periods when they are needed most, such as the recent financial crisis. Within a comprehensive comparative study we provide the latest piece of empirical evidence on the performance of a wide range of standard VaR approaches and highlight the overall outperformance of the newly developed methods.
Value-at-risk; Optimal forecast combination; Quantile regression; Method of moments; Financial crisis;
8
2012
36
1212
1228
C21
C5
G01
G17
G28
G32
http://www.sciencedirect.com/science/article/pii/S0165188912000887
Halbleib, Roxana
Pohlmeier, Winfried
oai:RePEc:eee:dyncon:v:15:y:1991:i:4:p:657-6732012-12-25RePEc:eee:dyncon
article
A simplified treatment of the theory of optimal regulation of Brownian motion
4
1991
15
10
657
673
http://www.sciencedirect.com/science/article/pii/0165-1889(91)90037-2
Dixit, Avinash
oai:RePEc:eee:dyncon:v:24:y:2000:i:11-12:p:1747-17822012-12-25RePEc:eee:dyncon
article
Applications of randomized low discrepancy sequences to the valuation of complex securities
11-12
2000
24
10
1747
1782
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00087-1
Tan, Ken Seng
Boyle, Phelim P.
oai:RePEc:eee:dyncon:v:25:y:2001:i:5:p:721-7462012-12-25RePEc:eee:dyncon
article
The importance of the number of different agents in a heterogeneous asset-pricing model
5
2001
25
5
721
746
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00038-5
Den Haan, Wouter J.
oai:RePEc:eee:dyncon:v:21:y:1997:i:8-9:p:1323-13522012-12-25RePEc:eee:dyncon
article
Pricing American-style securities using simulation
8-9
1997
21
6
1323
1352
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00029-8
Broadie, Mark
Glasserman, Paul
oai:RePEc:eee:dyncon:v:19:y:1995:i:5-7:p:961-9842014-08-08RePEc:eee:dyncon
article
On H[infin] criteria for macroeconomic policy evaluation
5-7
1995
19
961
984
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00815-Y
Caravani, P.
oai:RePEc:eee:dyncon:v:20:y:1996:i:5:p:925-9442014-08-08RePEc:eee:dyncon
article
Endogenous growth and collective bargaining
5
1996
20
5
925
944
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00882-9
Palokangas, Tapio
oai:RePEc:eee:dyncon:v:22:y:1998:i:5:p:779-7992014-08-08RePEc:eee:dyncon
article
Optimal timing of technology adoption
5
1998
22
5
779
799
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00097-3
Farzin, Y. H.
Huisman, K. J. M.
Kort, P. M.
oai:RePEc:eee:dyncon:v:25:y:2001:i:8:p:1193-12192014-08-08RePEc:eee:dyncon
article
Trigger-target rules and the dynamics of aggregate money holdings
8
2001
25
8
1193
1219
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00053-6
Greene, Clinton A.
oai:RePEc:eee:dyncon:v:35:y:2011:i:11:p:1817-18302014-08-08RePEc:eee:dyncon
article
Input–output interactions and optimal monetary policy
This paper deals with the implications of factor demand linkages for monetary policy design in a two-sector dynamic general equilibrium model. Part of the output of each sector serves as a production input in both sectors, in accordance with a realistic input–output structure. Strategic complementarities induced by factor demand linkages significantly alter the transmission of shocks and amplify the loss of social welfare under optimal monetary policy, compared to what is observed in standard two-sector models. The distinction between value added and gross output that naturally arises in this context is of key importance to explore the welfare properties of the model economy. A flexible inflation targeting regime is close to optimal only if the central bank balances inflation and value added variability. Otherwise, targeting gross output variability entails a substantial increase in the loss of welfare.
Input–output interactions; Multi-sector models; Optimal monetary policy;
11
2011
35
1817
1830
E23
E32
E52
http://www.sciencedirect.com/science/article/pii/S0165188911001059
Petrella, Ivan
Santoro, Emiliano
oai:RePEc:eee:dyncon:v:33:y:2009:i:3:p:614-6232014-08-08RePEc:eee:dyncon
article
Valuing programs with deterministic and stochastic cycles
In many dynamic programming problems, a mix of state variables exists - some exhibiting stochastic cycles and others having deterministic cycles. We derive a formula for the value function in infinite-horizon, stationary, Markovian decision problems by exploiting a special partitioned-circulant structure of the transition matrix [Pi]. Our strategy for computing the left-inverse of the matrix [I-[beta][Pi]], which is central to implementing Howard's policy iteration algorithm, yields significant improvements in computation time and major reductions in memory required. When the deterministic cycle is of order n, our cyclic inversion algorithm yields an O(n2) speed-up relative to the usual policy iteration algorithm.
Dynamic programming Policy iteration Deterministic cycles Stochastic cycles Circulant matrix Cyclic inversion algorithm
3
2009
33
3
614
623
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00150-4
Paarsch, Harry J.
Rust, John
oai:RePEc:eee:dyncon:v:31:y:2007:i:5:p:1672-16962014-08-08RePEc:eee:dyncon
article
Time to complete and research joint ventures: A differential game approach
5
2007
31
5
1672
1696
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00124-2
Navas, Jorge
Kort, Peter M.
oai:RePEc:eee:dyncon:v:22:y:1998:i:2:p:179-2072014-08-08RePEc:eee:dyncon
article
A model of learning and emulation with artificial adaptive agents
2
1998
22
2
179
207
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00072-9
Bullard, James
Duffy, John
oai:RePEc:eee:dyncon:v:26:y:2002:i:9-10:p:1397-14162014-08-08RePEc:eee:dyncon
article
An anticipative feedback solution for the infinite-horizon, linear-quadratic, dynamic, Stackelberg game
9-10
2002
26
8
1397
1416
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00077-X
Chen, Baoline
Zadrozny, Peter A.
oai:RePEc:eee:dyncon:v:37:y:2013:i:12:p:2943-29622014-08-08RePEc:eee:dyncon
article
Portfolio selection in a data-rich environment
We model portfolio weights as a function of latent factors that summarize the information in a large number of economic variables. This approach (hereafter diffusion index approach) offers the opportunity to exploit a much richer information base to improve portfolio selection. We use factor analysis to estimate the space spanned by the factors. This provides consistent estimates for the optimal weights as the number of economic variables and sample size go to infinity. We consider an empirical application to illustrate the practical usefulness of our approach. The results indicate that the diffusion index approach helps to improve the portfolio performance.
Portfolio's weights modeling; Factor analysis; Principal components; Portfolio performance; Stock returns; Fama–French factors; Economic factors; VIX;
12
2013
37
2943
2962
C13
C43
G11
G19
http://www.sciencedirect.com/science/article/pii/S0165188913001863
Bouaddi, Mohammed
Taamouti, Abderrahim
oai:RePEc:eee:dyncon:v:31:y:2007:i:6:p:2001-20322014-08-08RePEc:eee:dyncon
article
A smart market for passenger road transport (SMPRT) congestion: An application of computational mechanism design
6
2007
31
6
2001
2032
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00008-5
Markose, Sheri
Alentorn, Amadeo
Koesrindartoto, Deddy
Allen, Peter
Blythe, Phil
Grosso, Sergio
oai:RePEc:eee:dyncon:v:28:y:2004:i:12:p:2427-24562014-08-08RePEc:eee:dyncon
article
Using dynamic programming with adaptive grid scheme for optimal control problems in economics
12
2004
28
12
2427
2456
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00004-1
Grune, Lars
Semmler, Willi
oai:RePEc:eee:dyncon:v:12:y:1988:i:1:p:63-702014-08-08RePEc:eee:dyncon
article
Testing for bubbles, reflecting barriers and other anomalies
1
1988
12
3
63
70
http://www.sciencedirect.com/science/article/pii/0165-1889(88)90016-4
Diebold, Francis X.
oai:RePEc:eee:dyncon:v:33:y:2009:i:3:p:597-6132014-08-08RePEc:eee:dyncon
article
The effects of permanent technology shocks on hours: Can the RBC-model fit the VAR evidence?
I show that a standard RBC-model can be used to explain why hours per capita decrease in response to a permanent technology shock when hours enter a vector autoregressive (VAR) in first differences and why hours increase when hours enter in levels. There are two parts to my argument. First, empirical evidence suggests that a positive permanent technology shock goes together with a persistent increase in the expected growth rate and the RBC-model predicts this increase in the expected growth rate to have a downward effect on hours worked (and can even result in a sizeable negative response of hours). Second, first-differencing hours in VARs results in a considerable downward bias. Using the estimated parameters for the technology process, I find (i) that the true model response of hours is positive and (ii) that when the VAR methodology is used with finite samples of simulated data then the hours' response is negative (positive) when hours enter the VAR in first differences (levels).
Permanent technology shocks Hours worked per capita Labor productivity Real business cycle model Vector autoregressions
3
2009
33
3
597
613
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00149-8
Lindé, Jesper
oai:RePEc:eee:dyncon:v:15:y:1991:i:4:p:755-7692014-08-08RePEc:eee:dyncon
article
Comparative statics in dynamic programming models with an application to job search
4
1991
15
10
755
769
http://www.sciencedirect.com/science/article/pii/0165-1889(91)90043-Z
Albrecht, James W.
Holmlund, Bertil
Lang, Harald
oai:RePEc:eee:dyncon:v:32:y:2008:i:12:p:3877-38942014-08-08RePEc:eee:dyncon
article
Global analysis of an expectations augmented evolutionary dynamics
We consider a deterministic evolutionary model where players form expectations about future play. Players are not fully rational and have expectations that change over time in response to current payoffs and feedback from the past. We provide a complete characterization of the qualitative dynamics so induced for a two strategy population game, and relate our findings to standard evolutionary dynamics and equilibrium selection when agents have rational forward looking expectations.
Evolutionary games Dynamic systems Bounded rationality
12
2008
32
12
3877
3894
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00064-X
Antoci, Angelo
Gay, Antonio
Landi, Massimiliano
Sacco, Pier Luigi
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:323-3262014-08-08RePEc:eee:dyncon
article
Time inconsistency and optimal policy formulation in the presence of rational expectations
1-2
1986
10
6
323
326
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90058-8
Hall, S. G.
oai:RePEc:eee:dyncon:v:33:y:2009:i:4:p:997-10172014-08-08RePEc:eee:dyncon
article
On the evolution of the monetary policy transmission mechanism
This paper investigates whether the monetary transmission mechanism has changed or whether apparent changes are due to changes in the volatility of exogenous shocks. Also, the question of whether any changes have been gradual or abrupt is considered. A mixture innovation model is used which extends the class of time-varying vector autoregressive models with stochastic volatility. The advantage of our extension is that it allows us to estimate whether, where, when and how parameter change is occurring. Our empirical results indicate that the transmission mechanism, the volatility of exogenous shocks and the correlations between exogenous shocks are all changing.
Structural VAR Monetary policy Bayesian Mixture innovation model Time-varying parameter model
4
2009
33
4
997
1017
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00211-X
Koop, Gary
Leon-Gonzalez, Roberto
Strachan, Rodney W.
oai:RePEc:eee:dyncon:v:37:y:2013:i:3:p:516-5342014-08-08RePEc:eee:dyncon
article
Dynamically optimal R&D subsidization
This paper characterizes the optimal time path of R&D and capital subsidization. Starting from the steady state under current R&D subsidization in the US, the R&D subsidy should significantly jump upwards and then slightly decrease over time. There is a small loss in welfare, however, from immediately setting the R&D subsidy to its optimal long run level, compared to a time-varying R&D subsidy. The results do not depend on the financing scheme, namely lump sum taxation or factor income taxation. The optimal capital subsidy is time-varying under factor income taxation, but time-invariant when subsidies are financed by lump sum taxes.
R&D subsidy; Transitional dynamics; Semi-endogenous growth; Welfare;
3
2013
37
516
534
H20
O30
O40
http://www.sciencedirect.com/science/article/pii/S0165188912002059
Grossmann, Volker
Steger, Thomas
Trimborn, Timo
oai:RePEc:eee:dyncon:v:27:y:2003:i:6:p:1099-11122014-08-08RePEc:eee:dyncon
article
Back-testing the performance of an actively managed option portfolio at the Swedish Stock Market, 1990-1999
6
2003
27
4
1099
1112
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00056-8
Blomvall, Jorgen
Lindberg, Per Olov
oai:RePEc:eee:dyncon:v:32:y:2008:i:10:p:3376-33952014-08-08RePEc:eee:dyncon
article
Econometric analysis of structural systems with permanent and transitory shocks
10
2008
32
10
3376
3395
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00030-4
Pagan, A.R.
Pesaran, M. Hashem
oai:RePEc:eee:dyncon:v:5:y:1983:i:1:p:81-1082014-08-08RePEc:eee:dyncon
article
An algebraic approach to modeling
1
1983
5
2
81
108
http://www.sciencedirect.com/science/article/pii/0165-1889(83)90016-7
Meeraus, Alexander
oai:RePEc:eee:dyncon:v:14:y:1990:i:1:p:35-512014-08-08RePEc:eee:dyncon
article
Transactions costs and portfolio choice in a discrete-continuous-time setting
1
1990
14
2
35
51
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90004-Z
Duffie, Darrell
Sun, Tong-sheng
oai:RePEc:eee:dyncon:v:36:y:2012:i:5:p:716-7182014-08-08RePEc:eee:dyncon
article
Rejoinder to a remark on Lin and Chang's paper ‘Consistent modeling of S&P 500 and VIX derivatives’
We appreciate the thorough review and very useful comments of Cheng, Ibraimi, Leippold, and Zhang. The suggestions have helped significantly to improve our original approximation formula and lead us to provide an exact solution under the Lin and Chang (2010) framework and we thank the editor to give us an illustration chance. This rejoinder has two parts. The first presents a VIX option pricing formula in the stochastic volatility (SV) model. The numerical results using the authors' framework and notations are illustrated, too. The second is to explain our approximate formula in Lin and Chang (2010) and points out the limitation and calibrating technique of the approximation.
VIX options; Stochastic volatility; Characteristic functions;
5
2012
36
716
718
G12
G13
http://www.sciencedirect.com/science/article/pii/S0165188912000152
Lin, Yueh-Neng
Chang, Chien-Hung
oai:RePEc:eee:dyncon:v:37:y:2013:i:5:p:911-9282014-08-08RePEc:eee:dyncon
article
Targets for global climate policy: An overview
A survey of the economic impact of climate change and the marginal damage costs shows that carbon dioxide emissions are a negative externality. The estimated Pigou tax and its growth rate are too low to justify the climate policy targets set by political leaders. A lower discount rate or greater concern for the global distribution of income would justify more stringent climate policy, but would imply an overhaul of other public policies. Catastrophic risk justifies more stringent climate policy, but only to a limited extent.
Climate change; Climate policy; First-best;
5
2013
37
911
928
Q54
http://www.sciencedirect.com/science/article/pii/S0165188913000092
Tol, Richard S.J.
oai:RePEc:eee:dyncon:v:25:y:2001:i:5:p:671-7022014-08-08RePEc:eee:dyncon
article
Oligopoly equilibria in nonrenewable resource markets
5
2001
25
5
671
702
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00048-2
Salo, Seppo
Tahvonen, Olli
oai:RePEc:eee:dyncon:v:30:y:2006:i:12:p:2533-25522014-08-08RePEc:eee:dyncon
article
Another look at sticky prices and output persistence
12
2006
30
12
2533
2552
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00176-4
Wang, Peng-fei
Wen, Yi
oai:RePEc:eee:dyncon:v:44:y:2014:i:c:p:54-802014-08-08RePEc:eee:dyncon
article
Economic convergence: Policy implications from a heterogeneous agent model
In this paper we study the effectiveness of different types of cohesion policies with respect to convergence of regions. A two-region agent-based macroeconomic model is used to analyze short-, medium- and long-term effects of policies improving human capital and fostering adoption of technologies in lagging regions. With fully integrated labor markets the human capital policy positively affects the economically stronger region but reduces production in the targeted weaker region. Subsidies for high technology investment in the weaker region have a positive local output effect and a negative effect on the neighboring region, thereby fostering convergence. When labor markets are not integrated both policies support convergence.
Cohesion policies; Technology adoption; Skill complementarity; Agent-based model; Regional economics; Economic convergence;
C
2014
44
54
80
C63
O33
http://www.sciencedirect.com/science/article/pii/S0165188914000852
Dawid, H.
Harting, P.
Neugart, M.
oai:RePEc:eee:dyncon:v:20:y:1996:i:4:p:559-5822014-08-08RePEc:eee:dyncon
article
A maximum entropy approach to estimation and inference in dynamic models or Counting fish in the sea using maximum entropy
4
1996
20
4
559
582
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00864-0
Golan, Amos
Judge, George
Karp, Larry
oai:RePEc:eee:dyncon:v:10:y:1986:i:1-2:p:45-492014-08-08RePEc:eee:dyncon
article
Games, expectations, and optimal policy for open economies
1-2
1986
10
6
45
49
http://www.sciencedirect.com/science/article/pii/0165-1889(86)90016-3
Holly, Sean
oai:RePEc:eee:dyncon:v:19:y:1995:i:4:p:831-8432014-08-08RePEc:eee:dyncon
article
Stationary sunspot equilibrium in a cash-in-advance economy
4
1995
19
5
831
843
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00806-S
Huo, Teh-Ming
oai:RePEc:eee:dyncon:v:22:y:1998:i:8-9:p:1209-12332014-08-08RePEc:eee:dyncon
article
Evolved perception and behaviour in oligopolies
8-9
1998
22
8
1209
1233
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00010-4
Marks, Robert
oai:RePEc:eee:dyncon:v:22:y:1998:i:2:p:321-3282014-08-08RePEc:eee:dyncon
article
The macrodynamics of business cycles: A comparative evaluation : Mohammed H.I. Dore, Blackwell, Cambridge MA and Oxford UK, 1993, $ 24.95, 242 pp.
2
1998
22
2
321
328
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00092-4
Sordi, Serena
oai:RePEc:eee:dyncon:v:32:y:2008:i:8:p:2584-26212014-08-08RePEc:eee:dyncon
article
Optimal price setting and inflation inertia in a rational expectations model
8
2008
32
8
2584
2621
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00206-0
Juillard, Michael
Kamenik, Ondra
Kumhof, Michael
Laxton, Douglas
oai:RePEc:eee:dyncon:v:28:y:2004:i:4:p:841-8562014-08-08RePEc:eee:dyncon
article
Multiple equilibria, fiscal policy, and human capital accumulation
4
2004
28
1
841
856
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00063-0
Alonso-Carrera, Jaime
Freire-Seren, Maria Jesus
oai:RePEc:eee:dyncon:v:19:y:1995:i:1-2:p:371-3932014-08-08RePEc:eee:dyncon
article
A dynamic model of capital and arms accumulation
1-2
1995
19
371
393
http://www.sciencedirect.com/science/article/pii/0165-1889(93)00786-4
Zou, Heng-fu
oai:RePEc:eee:dyncon:v:15:y:1991:i:2:p:409-4172014-08-08RePEc:eee:dyncon
article
Information processing in dynamic decision models : An insurance demand example
2
1991
15
4
409
417
http://www.sciencedirect.com/science/article/pii/0165-1889(91)90020-2
Jammernegg, Werner
Kischka, Peter
oai:RePEc:eee:dyncon:v:30:y:2006:i:2:p:323-3452014-08-08RePEc:eee:dyncon
article
Winding number criterion for existence and uniqueness of equilibrium in linear rational expectations models
2
2006
30
2
323
345
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00035-7
Onatski, Alexei
oai:RePEc:eee:dyncon:v:31:y:2007:i:11:p:3503-35442014-08-08RePEc:eee:dyncon
article
Asset allocation under multivariate regime switching
11
2007
31
11
3503
3544
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00227-2
Guidolin, Massimo
Timmermann, Allan
oai:RePEc:eee:dyncon:v:26:y:2002:i:3:p:423-4352014-08-08RePEc:eee:dyncon
article
A note on robustness in Merton's model of intertemporal consumption and portfolio choice
3
2002
26
3
423
435
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00054-3
Trojani, Fabio
Vanini, Paolo
oai:RePEc:eee:dyncon:v:20:y:1996:i:4:p:607-6262014-08-08RePEc:eee:dyncon
article
Market equilibria with endogenous, hierarchical information
4
1996
20
4
607
626
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00867-5
McNulty, Mark S.
Huffman, Wallace E.
oai:RePEc:eee:dyncon:v:36:y:2012:i:3:p:369-3822014-08-08RePEc:eee:dyncon
article
The role of spatial scale in the timing of uncertain environmental policy
The spatial scale of an environmental problem is dictated by boundaries. Physical boundaries limit the extent of impacts while the scale of decision making creates perceived boundaries beyond which impacts are ignored by decision makers. While it is well understood that uncertainty and irreversibility will alter policy decisions aimed at alleviating environmental impacts, the effect of spatial scales, both physical and perceived, is less understood. When spatial scale is included in a real options model of environmental policy adoption results indicate that the importance and influence of spatial considerations depends on the level of uncertainty, stringency of the proposed policy and flexibility of the policy decision. Recognizing spatial scale may force policy adoption to take place within a window of current damage. When spatial scale is small or uncertainty high, this window for policy adoption can close precluding policy adoption entirely. This undermines well-known results demonstrating that changes in uncertainty will only alter the timing of policy adoption. In other instances, the policy adoption window remains open but the option value increases faster than the benefits of the policy creating a scenario where it is always preferable to delay. Here the inclusion of an option value can prevent adoption of policies that would be adopted according to traditional cost-benefit analysis. In general policy decisions will be most affected by spatial considerations when the spatial scale is small, damage is spreading fast, and the uncertainty in damage spread is high.
Reflecting barrier; Brownian motion; Irreversibility; Real options; Spatial boundary;
3
2012
36
369
382
D81
H43
Q58
http://www.sciencedirect.com/science/article/pii/S0165188911001667
Sims, Charles
Finnoff, David
oai:RePEc:eee:dyncon:v:26:y:2002:i:9-10:p:1539-15552014-08-08RePEc:eee:dyncon
article
The cross-sectional dynamics of the US business cycle: 1950-1999
9-10
2002
26
8
1539
1555
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00084-7
Higson, C.
Holly, S.
Kattuman, P.
oai:RePEc:eee:dyncon:v:29:y:2005:i:8:p:1287-13122014-08-08RePEc:eee:dyncon
article
Hedging using simulation: a least squares approach
8
2005
29
8
1287
1312
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00093-4
Tebaldi, Claudio
oai:RePEc:eee:dyncon:v:32:y:2008:i:5:p:1680-17002014-08-08RePEc:eee:dyncon
article
Optimal insurance under costly falsification and costly, inexact verification
This paper integrates the often dichotomized models of costly state verification and costly claim falsification. It is found that when verification is inexact, it is possible for an optimal insurance contract to consist of both positive claim falsification and positive insurer verification, provided that falsification cost and verification cost are sufficiently low, and the insured is risk-averse satisfying constant absolute risk aversion. This result certainly contrasts with the common belief that falsification and verification are mutually exclusive in an optimal insurance contract. Some characteristics of the optimal falsification, verification, and indemnification profiles, including implementability, are analyzed.
5
2008
32
5
1680
1700
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00164-9
Hau, Arthur
oai:RePEc:eee:dyncon:v:21:y:1997:i:2-3:p:297-3272014-08-08RePEc:eee:dyncon
article
Numerical analysis of a free-boundary singular control problem in financial economics
2-3
1997
21
297
327
http://www.sciencedirect.com/science/article/pii/S0165-1889(96)00933-5
Hindy, Ayman
Huang, Chi-fu
Zhu, Steven H.
oai:RePEc:eee:dyncon:v:32:y:2008:i:3:p:909-9382014-08-08RePEc:eee:dyncon
article
Snowball: A dynamic oligopoly model with indirect network effects
Allowing for innovation dynamics in the software market, this paper studies the conditions under which standardization in the hardware market arises and persists over time. In the model, software firms repeatedly invest in quality upgrades, compete in the product market, and make exit as well as entry decisions. The results show that, in general, excess inertia does not occur. A platform becomes the standard in a market only if it is better than the competing platforms. Furthermore, low overall rates of innovation always lead to variety; conversely, the higher the speed of innovation, the more likely standardization is.
3
2008
32
3
909
938
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00105-4
Markovich, Sarit
oai:RePEc:eee:dyncon:v:36:y:2012:i:9:p:1322-13392014-08-08RePEc:eee:dyncon
article
Progressive services, asymptotically stagnant services, and manufacturing: Growth and structural change
We present a model of structural change which, distinctively, sub-divides services (S) into ‘Progressive Services’ (PS) and ‘Asymptotically Stagnant Services’ (AS), to better reflect the advent of the New Economy. A manufacturing (M) sector is also included, and non-homothetic preferences assumed. An expanding-product-variety endogenous-growth framework is adopted, and partially overlapping input sets across the three (sub-)sectors assumed. The model endogenously generates different stages of growth: services which in due course become classified as progressive first overtake AS, and then M, in innovation-driven productivity growth, consistent with post-World-War-II US experience. The socially optimal growth pattern differs qualitatively from the private, and optimal, time-varying R&D subsidies are identified.
Progressive services; Information technology; Structural change; Endogenous growth; Non-homothetic preferences;
9
2012
36
1322
1339
O41
H25
http://www.sciencedirect.com/science/article/pii/S0165188912000632
Kapur, Basant K.
oai:RePEc:eee:dyncon:v:17:y:1993:i:4:p:621-6302014-08-08RePEc:eee:dyncon
article
Optimal control without solving the Bellman equation
4
1993
17
7
621
630
http://www.sciencedirect.com/science/article/pii/0165-1889(93)90049-X
Chow, Gregory C.
oai:RePEc:eee:dyncon:v:31:y:2007:i:2:p:593-6122014-08-08RePEc:eee:dyncon
article
From structural assumptions to a link between assets and interest rates
2
2007
31
2
593
612
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00034-0
Rei[ss], Oliver
Schoenmakers, John
Schweizer, Martin
oai:RePEc:eee:dyncon:v:20:y:1996:i:1-3:p:123-1432014-08-08RePEc:eee:dyncon
article
Looking for evidence of speculative stockholding in commodity markets
1-3
1996
20
123
143
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00846-8
Ng, Serena
oai:RePEc:eee:dyncon:v:11:y:1987:i:2:p:265-2682014-08-08RePEc:eee:dyncon
article
Forecasting and stabilization of multiple economic time series in the state space
2
1987
11
6
265
268
http://www.sciencedirect.com/science/article/pii/0165-1889(87)90018-2
Vishwakarma, Keshav P.
oai:RePEc:eee:dyncon:v:2:y:1980:i:1:p:213-2312014-08-08RePEc:eee:dyncon
article
Energy conservation and induced inflation
1
1980
2
5
213
231
http://www.sciencedirect.com/science/article/pii/0165-1889(80)90062-7
Sharp, John
Shupp, Franklin
Perkins, William
oai:RePEc:eee:dyncon:v:11:y:1987:i:2:p:257-2632014-08-08RePEc:eee:dyncon
article
Business cycle stylized facts and explanatory models
2
1987
11
6
257
263
http://www.sciencedirect.com/science/article/pii/0165-1889(87)90017-0
Hillinger, Claude
oai:RePEc:eee:dyncon:v:37:y:2013:i:3:p:666-6792014-08-08RePEc:eee:dyncon
article
Large shareholders, monitoring, and ownership dynamics: Toward pure managerial firms?
We study ownership dynamics when the manager and the large shareholder, both risk neutral, simultaneously choose effort and monitoring level respectively to serve their non-congruent interests.We show that there is a wedge between the valuation of shares by atomistic shareholders and the large shareholder's valuation. At the Markov-perfect equilibrium, the large shareholder divests her shares. If the incongruence of their interests is mild, divestment is drastic: all her shares are sold immediately. If their interests diverge sharply, the divestment is gradual in order to prevent a sharp fall in share price. In the limit the firm becomes purely managerial.
Ownership dynamics; Managerial firms;
3
2013
37
666
679
G3
http://www.sciencedirect.com/science/article/pii/S0165188912002047
Hilli, Amal
Laussel, Didier
Van Long, Ngo
oai:RePEc:eee:dyncon:v:18:y:1994:i:3-4:p:511-5382014-08-08RePEc:eee:dyncon
article
A dynamic migration model with uncertainty
3-4
1994
18
511
538
http://www.sciencedirect.com/science/article/pii/0165-1889(94)90021-3
El-Gamal, Mahmoud A.
oai:RePEc:eee:dyncon:v:7:y:1984:i:3:p:377-3792014-08-08RePEc:eee:dyncon
article
Comment choosing a monetary instrument the case of supply-side shocks
3
1984
7
9
377
379
http://www.sciencedirect.com/science/article/pii/0165-1889(84)90026-5
Jansen, Dennis W.
oai:RePEc:eee:dyncon:v:16:y:1992:i:3-4:p:403-4262014-08-08RePEc:eee:dyncon
article
Theory of constant proportion portfolio insurance
3-4
1992
16
403
426
http://www.sciencedirect.com/science/article/pii/0165-1889(92)90043-E
Black, Fischer
Perold, AndreF.
oai:RePEc:eee:dyncon:v:36:y:2012:i:3:p:331-3482014-08-08RePEc:eee:dyncon
article
Growth and inequality: Dependence on the time path of productivity increases (and other structural changes)
This paper examines the significance of the time path of a given productivity increase on growth and inequality. Whereas the time path impacts only the transitional paths of aggregate quantities, it has both transitional and permanent consequences for wealth and income distribution. Hence, the growth–inequality tradeoff generated by a given discrete increase in productivity contrasts sharply with that obtained when the same productivity increase occurs gradually. The latter can generate a Kuznets-type relationship between inequality and per-capita income. Our results suggest that economies with similar aggregate structural characteristics may have different outcomes for income and wealth inequality, depending on the nature of the productivity growth path.
Growth; Inequality; Path dependence;
3
2012
36
331
348
D31
O41
http://www.sciencedirect.com/science/article/pii/S0165188911001643
Atolia, Manoj
Chatterjee, Santanu
Turnovsky, Stephen J.
oai:RePEc:eee:dyncon:v:20:y:1996:i:5:p:767-7892014-08-08RePEc:eee:dyncon
article
Improved estimates of the parameters of state space time series models
5
1996
20
5
767
789
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00874-8
Havenner, Arthur
Zhiqiang Leng
oai:RePEc:eee:dyncon:v:23:y:1999:i:7:p:929-9652014-08-08RePEc:eee:dyncon
article
A theory of optimal timing and selectivity
7
1999
23
6
929
965
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00050-5
Chacko, George
Das, Sanjiv Ranjan
oai:RePEc:eee:dyncon:v:33:y:2009:i:6:p:1345-13602014-08-08RePEc:eee:dyncon
article
Cake eating, exhaustible resource extraction, life-cycle saving, and non-atomic games: Existence theorems for a class of optimal allocation problems
This paper investigates the problem concerning the existence of a solution to a diverse class of optimal allocation problems which include models of cake eating, exhaustible resource extraction, life-cycle saving, and non-atomic games. A new formulation that encompasses all these diverse models is provided. Examples of these models for which a solution does not exist and the causes of the non-existence are studied. Two theorems are provided to tackle the existence problem under different conditions. Several analytical examples with a closed-form solution are offered to illustrate the usefulness of the existence theorems.
Cake eating Exhaustible resource extraction Life-cycle saving Non-atomic games Optimal allocation Existence
6
2009
33
6
1345
1360
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00016-5
Leung, Siu Fai
oai:RePEc:eee:dyncon:v:29:y:2005:i:8:p:1449-14692014-08-08RePEc:eee:dyncon
article
International relocation, the real exchange rate and welfare
8
2005
29
8
1449
1469
http://www.sciencedirect.com/science/article/pii/S0165-1889(04)00107-1
Johdo, Wataru
Hashimoto, Ken-ichi
oai:RePEc:eee:dyncon:v:23:y:1998:i:2:p:255-2762014-08-08RePEc:eee:dyncon
article
An aggregative model of capital accumulation with leisure-dependent utility
2
1998
23
9
255
276
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00119-X
de Hek, Paul A.
oai:RePEc:eee:dyncon:v:7:y:1984:i:3:p:209-2312014-08-08RePEc:eee:dyncon
article
A dynamic generalization of the tobin model
3
1984
7
9
209
231
http://www.sciencedirect.com/science/article/pii/0165-1889(84)90017-4
Hayakawa, Hiroaki
oai:RePEc:eee:dyncon:v:31:y:2007:i:10:p:3370-33952014-08-08RePEc:eee:dyncon
article
Initial conditions at Emancipation: The long-run effect on black-white wealth and earnings inequality
10
2007
31
10
3370
3395
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00223-5
White, T. Kirk
oai:RePEc:eee:dyncon:v:33:y:2009:i:5:p:1023-10352014-08-08RePEc:eee:dyncon
article
The market organism: Long-run survival in markets with heterogeneous traders
The information content of prices is a central problem in the general equilibrium analysis of competitive markets. Rational expectations equilibrium identifies conditioning simultaneously on contemporaneous prices and private information as the mechanism by which information enters prices. Here we look to the ecology of markets for an explanation of the information content of prices. Markets could select across traders with different beliefs, or, reminiscent of 'the wisdom of crowds', markets could balance the diverse information of many participants. We provide theoretical support in favor of the first mechanism, and against the second. Along the way we demonstrate that the necessary condition for long-run survival in complete markets found in Sandroni [2000. Do markets favor agents able to make accurate predictions? Econometrica 68 (6), 1303-1342] and in Blume and Easley [2006. If you're so smart, why aren't you rich? Belief selection in complete and incomplete markets. Econometrica 74 (4), 929-966] is not sufficient for long-run survival. We also demonstrate some surprising behavior of market prices when several trader types with different beliefs survive. This paper continues the research program of Blume and Easley [1992. Evolution and market behavior. Journal of Eonomic theory 58 (1), 9-40] and Beker and Chattopadhyay [2006. Consumption dynamics in general equilibrium: a characterisation when markets are incomplete, University of Warwick, unpublished].
General equilibrium Market selection hypothesis
5
2009
33
5
1023
1035
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00027-X
Blume, Lawrence
Easley, David
oai:RePEc:eee:dyncon:v:34:y:2010:i:12:p:2420-24392014-08-08RePEc:eee:dyncon
article
Maintenance and investment: Complements or substitutes? A reappraisal
A benchmark AK optimal growth model with maintenance expenditures and endogenous utilization of capital is considered within an explicit vintage capital framework. Scrapping is endogenous, and the model allows for a clean distinction between age and usage dependent capital depreciation and obsolescence. It is also shown that in this set-up past investment profile completely determines the size of current maintenance expenditures. Among other findings, a closed-form solution to optimal dynamics is provided taking advantage of very recent development in optimal control of infinite dimensional systems. More importantly, and in contrast to the pre-existing literature, we study investment and maintenance co-movements without any postulated ad hoc depreciation function. In particular using impulse response experiments, we find that optimal investment and maintenance do move together in the short-run in response to neutral technological shocks, which seems to be more consistent with the data.
Maintenance Investment Optimal control Dynamic programming Infinite dimensional problem
12
2010
34
12
2420
2439
http://www.sciencedirect.com/science/article/pii/S0165-1889(10)00137-5
Boucekkine, R.
Fabbri, G.
Gozzi, F.
oai:RePEc:eee:dyncon:v:19:y:1995:i:1-2:p:91-1242014-08-08RePEc:eee:dyncon
article
On the cyclical allocation of risk
1-2
1995
19
91
124
http://www.sciencedirect.com/science/article/pii/0165-1889(93)00776-Z
Gomme, Paul
Greenwood, Jeremy
oai:RePEc:eee:dyncon:v:19:y:1995:i:5-7:p:1091-11112014-08-08RePEc:eee:dyncon
article
Monetary policy games with broad money targets a linear quadratic control analysis of the U.S. and Japan
5-7
1995
19
1091
1111
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00820-8
McNelis, Paul D.
Asilis, Carlos M.
oai:RePEc:eee:dyncon:v:23:y:1998:i:1:p:71-952014-08-08RePEc:eee:dyncon
article
Real investment decisions under adjustment costs and asymmetric information
1
1998
23
9
71
95
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00107-3
Gaudet, Gerard
Lasserre, Pierre
Van Long, Ngo
oai:RePEc:eee:dyncon:v:27:y:2003:i:11-12:p:2059-20942014-08-08RePEc:eee:dyncon
article
Monetary policy rules for an open economy
11-12
2003
27
9
2059
2094
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00116-1
Batini, Nicoletta
Harrison, Richard
Millard, Stephen P.
oai:RePEc:eee:dyncon:v:31:y:2007:i:12:p:3881-38882014-08-08RePEc:eee:dyncon
article
Devaluating projects and the investment-uncertainty relationship
12
2007
31
12
3881
3888
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00035-8
Gutierrez, Oscar
oai:RePEc:eee:dyncon:v:30:y:2006:i:11:p:2281-23032014-08-08RePEc:eee:dyncon
article
Default and information
11
2006
30
11
2281
2303
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00156-9
Giesecke, Kay
oai:RePEc:eee:dyncon:v:27:y:2003:i:4:p:599-6182014-08-08RePEc:eee:dyncon
article
The general instability of balanced paths in endogenous growth models: the role of transversality conditions
4
2003
27
2
599
618
http://www.sciencedirect.com/science/article/pii/S0165-1889(01)00063-X
Martinez-Garcia, Maria Pilar
oai:RePEc:eee:dyncon:v:20:y:1996:i:1-3:p:19-422014-08-08RePEc:eee:dyncon
article
Solving the stochastic growth model with a finite element method
1-3
1996
20
19
42
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00842-0
McGrattan, Ellen R.
oai:RePEc:eee:dyncon:v:27:y:2003:i:11:p:2007-20342014-08-08RePEc:eee:dyncon
article
Information technologies, embodiment and growth
This paper studies the conditions under which an IT revolution may occur and have permanent effects on long-term growth. To this end, we construct a multi-sectoral growth model with endogenous embodied technical progress. The R&D sector expands the range of softwares. The capital sector produces efficient capital combining hardware with available softwares. Technological progress is therefore embodied: New softwares can only be run on the most recent generations of hardware. The new softwares are copyrighted during a fixed period of time. First, we analytically characterize the balanced growth paths of the model. Then we focus on the dynamic response of the economy to technological shocks. Substitution effects favorable to the IT sectors are shown to arise when positive supply shocks affect the production of efficient capital and/or the creation of new softwares. Positive shocks specific to the capital sector are unable to produce effects on long-term growth, in contrast to the shocks specific to the R&D sector.
Information technology; Vintage capital; Embodied technological progress; Endogenous growth;
11
2003
27
2007
2034
E22
E32
O40
C63
http://www.sciencedirect.com/science/article/pii/S0165188902001148
Boucekkine, Raouf
de la Croix, David
oai:RePEc:eee:dyncon:v:22:y:1998:i:8-9:p:1319-13332014-08-08RePEc:eee:dyncon
article
Simple reordering techniques for expanding the convergence radius of first-order iterative techniques
8-9
1998
22
8
1319
1333
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00014-1
Hallett, A. J. Hughes
Piscitelli, Laura
oai:RePEc:eee:dyncon:v:19:y:1995:i:8:p:1355-13892014-08-08RePEc:eee:dyncon
article
A dynamic general equilibrium analysis of deviations from the laws of one price
8
1995
19
11
1355
1389
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00833-4
Lapham, Beverly J.
oai:RePEc:eee:dyncon:v:31:y:2007:i:6:p:1938-19702014-08-08RePEc:eee:dyncon
article
Behavioral heterogeneity in stock prices
6
2007
31
6
1938
1970
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00006-1
Boswijk, H. Peter
Hommes, Cars H.
Manzan, Sebastiano
oai:RePEc:eee:dyncon:v:36:y:2012:i:2:p:169-1822014-08-08RePEc:eee:dyncon
article
Disinflation in a DSGE perspective: Sacrifice ratio or welfare gain ratio?
When used to examine disinflation monetary policies, the current workhorse dynamic stochastic general equilibrium model of business cycle fluctuations is able to quantitatively account for the main stylized facts in terms of recessionary effects and sacrifice ratio. We complement the transitional analysis of the short-run costs with a rigorous welfare evaluation and show that, despite the long-lasting economic downturn, disinflation entails non-zero overall welfare gains.
Disinflation; Sacrifice ratio; Non-linearities;
2
2012
36
169
182
E31
E5
http://www.sciencedirect.com/science/article/pii/S016518891100193X
Ascari, Guido
Ropele, Tiziano
oai:RePEc:eee:dyncon:v:25:y:2001:i:8:p:1109-11152014-08-08RePEc:eee:dyncon
article
The net present value method versus the option value of waiting: A note on Farzin, Huisman and Kort (1998)
8
2001
25
8
1109
1115
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00023-3
Doraszelski, Ulrich
oai:RePEc:eee:dyncon:v:30:y:2006:i:12:p:2823-28572014-08-08RePEc:eee:dyncon
article
Can money matter for interest rate policy?
12
2006
30
12
2823
2857
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00208-3
Bruckner, Matthias
Schabert, Andreas
oai:RePEc:eee:dyncon:v:19:y:1995:i:5-7:p:873-9002014-08-08RePEc:eee:dyncon
article
Portfolio choice with Knightian uncertainty
5-7
1995
19
873
900
http://www.sciencedirect.com/science/article/pii/0165-1889(94)00811-U
Orszag, J. Michael
Yang, Hong
oai:RePEc:eee:dyncon:v:18:y:1994:i:2:p:397-4102014-08-08RePEc:eee:dyncon
article
Big shocks versus small shocks in a dynamic stochastic economy with many interacting agents
2
1994
18
3
397
410
http://www.sciencedirect.com/science/article/pii/0165-1889(94)90015-9
Kelly, Morgan
oai:RePEc:eee:dyncon:v:27:y:2003:i:8:p:1437-14572014-08-08RePEc:eee:dyncon
article
Learning with bounded memory in stochastic models
8
2003
27
6
1437
1457
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00066-0
Honkapohja, Seppo
Mitra, Kaushik
oai:RePEc:eee:dyncon:v:16:y:1992:i:3-4:p:533-5592014-08-08RePEc:eee:dyncon
article
Banking in computable general equilibrium economies
3-4
1992
16
533
559
http://www.sciencedirect.com/science/article/pii/0165-1889(92)90048-J
Diaz-Gimenez, Javier
Prescott, Edward C.
Fitzgerald, Terry
Alvarez, Fernando
oai:RePEc:eee:dyncon:v:31:y:2007:i:5:p:1697-17272014-08-08RePEc:eee:dyncon
article
Heterogeneous beliefs, asset prices, and volatility in a pure exchange economy
5
2007
31
5
1697
1727
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00125-4
Li, Tao
oai:RePEc:eee:dyncon:v:33:y:2009:i:4:p:938-9542014-08-08RePEc:eee:dyncon
article
Matching with interviews
This paper explores how interviews affect the matching process when worker productivity is private information. Wages are determined by a single round of strategic bargaining after the worker is interviewed. The implications of this hiring process for the efficiency of matching and the incidence and severity of statistical discrimination are considered. The better are firms at identifying productive workers the worse the average quality of the unemployment pool so interviewing tends to slow down matching for every one. Multiple Pareto rankable equilibria are possible such that any social group in a "bad" equilibrium faces stricter hiring standards, longer spells of unemployment and lower welfare.
Search Private information Statistical discrimination Unemployment
4
2009
33
4
938
954
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00187-5
Masters, Adrian
oai:RePEc:eee:dyncon:v:43:y:2014:i:c:p:218-2402014-08-08RePEc:eee:dyncon
article
Financial fragility, sovereign default risk and the limits to commercial bank bail-outs
We show that with intertwined weak banks and weak sovereigns, bank recapitalizations become much less effective. We construct a DSGE model with leverage constrained banks lending to firms and holding domestic government bonds. Bond prices reflect endogenously generated sovereign risk. This introduces a negative amplification cycle: after a credit crisis output losses increase more because higher interest rates trigger lower bond prices and subsequent losses at banks. This further tightens bank leverage constraints, and causes interest rates to rise further. Also bank recapitalizations are then much less effective. Recaps involve swaps of newly issued sovereign bonds for bank equity, the new debt increases sovereign debt discounts, leading to capital losses for the banks on their holdings of sovereign debt that (partially) offset the impact of the recapitalization. The favorable macroeconomic effects of bank recaps on the recovery after a financial crisis are correspondingly lower.
Financial intermediation; Macrofinancial fragility; Fiscal policy; Sovereign default risk;
C
2014
43
218
240
E44
E62
H30
http://www.sciencedirect.com/science/article/pii/S0165188914000797
van der Kwaak, C.G.F.
van Wijnbergen, S.J.G.
oai:RePEc:eee:dyncon:v:18:y:1994:i:5:p:931-9552014-08-08RePEc:eee:dyncon
article
Threshold heteroskedastic models
5
1994
18
9
931
955
http://www.sciencedirect.com/science/article/pii/0165-1889(94)90039-6
Zakoian, Jean-Michel
oai:RePEc:eee:dyncon:v:37:y:2013:i:9:p:1715-17352014-08-08RePEc:eee:dyncon
article
Non-separability and sectoral comovement in a sticky price model
This paper resolves the sectoral comovement problem between nondurable and durable outputs that arises in response to a monetary shock in a two-sector sticky price model with flexibly priced durable goods. We analytically demonstrate that the non-separability between aggregate consumption and labor can generate the comovement between nondurable and durable outputs in response to a monetary policy shock. We then estimate the degree of non-separability, together with other parameters, using a Bayesian approach. We find that the non-separable preferences are supported by the data and our estimated model generates the sectoral comovement in response to a monetary shock.
Sticky price; Durable goods; Comovement; Non-separable preferences;
9
2013
37
1715
1735
E21
E30
E31
E32
http://www.sciencedirect.com/science/article/pii/S0165188913000894
Kim, Kwang Hwan
Katayama, Munechika
oai:RePEc:eee:dyncon:v:4:y:1982:i:1:p:341-3692014-08-08RePEc:eee:dyncon
article
A survey of some differential games in advertising
1
1982
4
11
341
369
http://www.sciencedirect.com/science/article/pii/0165-1889(82)90024-0
Jorgensen, Steffen
oai:RePEc:eee:dyncon:v:21:y:1997:i:8-9:p:1543-15752014-08-08RePEc:eee:dyncon
article
A learning-to-forecast experiment on the foreign exchange market with a classifier system
8-9
1997
21
6
1543
1575
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00035-3
Beltrametti, Luca
Fiorentini, Riccardo
Marengo, Luigi
Tamborini, Roberto
oai:RePEc:eee:dyncon:v:31:y:2007:i:11:p:3591-36132014-08-08RePEc:eee:dyncon
article
A computational scheme for the optimal strategy in an incomplete market
11
2007
31
11
3591
3613
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00014-0
Keppo, Jussi
Meng, Xu
Sullivan, Michael G.
oai:RePEc:eee:dyncon:v:20:y:1996:i:4:p:627-6562014-08-08RePEc:eee:dyncon
article
Aggregate fluctuations with increasing returns to specialization and scale
4
1996
20
4
627
656
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00868-3
Devereux, Michael B.
Head, Allen C.
Lapham, Beverly J.
oai:RePEc:eee:dyncon:v:4:y:1982:i:1:p:37-552014-08-08RePEc:eee:dyncon
article
A characterization of erratic dynamics in, the overlapping generations model
1
1982
4
11
37
55
http://www.sciencedirect.com/science/article/pii/0165-1889(82)90002-1
Benhabib, Jess
Day, Richard H.
oai:RePEc:eee:dyncon:v:23:y:1999:i:9-10:p:1517-15432014-08-08RePEc:eee:dyncon
article
Tests for bounded rationality with a linear dynamic model distorted by heterogeneous expectations
9-10
1999
23
9
1517
1543
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00082-7
Baak, Saang Joon
oai:RePEc:eee:dyncon:v:25:y:2001:i:6-7:p:951-9662014-08-08RePEc:eee:dyncon
article
Parametric pension reform with higher retirement ages: A computational investigation of alternatives for a pay-as-you-go-based pension system
6-7
2001
25
6
951
966
http://www.sciencedirect.com/science/article/pii/S0165-1889(00)00062-2
Sayan, Serdar
Kiraci, Arzdar
oai:RePEc:eee:dyncon:v:33:y:2009:i:4:p:832-8422014-08-08RePEc:eee:dyncon
article
Note on Goodwin's 1951 nonlinear accelerator model with an investment delay
This paper reexamines Goodwin's business cycle model with nonlinear acceleration principle that gives rise to cyclic oscillations when its stationary state is locally unstable. Fixed time delay in the investment is replaced by continuously distributed time delay. It is first demonstrated that the latter has stronger stabilizing effect than the former and, second, that multiple limit cycles may coexist when the stationary state is locally stable.
Fixed time delay Continuously distributed time delay S-shaped investment function Coexistence of multiple limit cycles
4
2009
33
4
832
842
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00181-4
Matsumoto, Akio
oai:RePEc:eee:dyncon:v:20:y:1996:i:9-10:p:1801-18082014-08-08RePEc:eee:dyncon
article
Investment under uncertainty: A review essay
9-10
1996
20
1801
1808
http://www.sciencedirect.com/science/article/pii/0165-1889(95)00922-1
Chirinko, Robert S.
oai:RePEc:eee:dyncon:v:2:y:1980:i:1:p:377-3932014-08-08RePEc:eee:dyncon
article
Stochastic macroeconomic control with non-identical control intervals
1
1980
2
5
377
393
http://www.sciencedirect.com/science/article/pii/0165-1889(80)90071-8
Stanhouse, Bryan E.
Fackler, James S.
oai:RePEc:eee:dyncon:v:14:y:1990:i:2:p:219-2362014-08-08RePEc:eee:dyncon
article
A production model construction system : PM statement to math programming
2
1990
14
5
219
236
http://www.sciencedirect.com/science/article/pii/0165-1889(90)90018-C
Kendrick, David A.
oai:RePEc:eee:dyncon:v:28:y:2004:i:11:p:2327-23392014-08-08RePEc:eee:dyncon
article
Signalling ability to pay and rent sharing dynamics
11
2004
28
10
2327
2339
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00209-4
Vahey, Shaun P.
oai:RePEc:eee:dyncon:v:22:y:1998:i:7:p:1091-11152014-08-08RePEc:eee:dyncon
article
Transitional dynamics of the search model with endogenous growth
7
1998
22
5
1091
1115
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00095-X
Postel-Vinay, Fabien
oai:RePEc:eee:dyncon:v:23:y:1999:i:5-6:p:727-7462014-08-08RePEc:eee:dyncon
article
Training, adverse selection and appropriate technology: Development and growth in a small open economy
5-6
1999
23
4
727
746
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00041-4
Eicher, T. S.
oai:RePEc:eee:dyncon:v:37:y:2013:i:12:p:2466-24822014-08-08RePEc:eee:dyncon
article
Social security and cross-country differences in hours: A general equilibrium analysis
I develop a general equilibrium life cycle model with an intensive and extensive margin of labor supply and endogenous human capital accumulation. I use the model to assess the effects of changes to various features of social security on labor supply outcomes. Of particular interest are changes to the scale of the program and to the relevant eligibility rules. I find that the cross-country differences in social security programs account for at least 79% of the differences in employment rates of people aged 55–64 and 17–31% of the differences in aggregate hours worked between the US and continental Europe.
Life cycle; Retirement; Social security;
12
2013
37
2466
2482
E24
J22
J24
J26
http://www.sciencedirect.com/science/article/pii/S0165188913001346
Wallenius, Johanna
oai:RePEc:eee:dyncon:v:17:y:1993:i:1-2:p:289-3172014-08-08RePEc:eee:dyncon
article
Testing for sunspot equilibria in the German hyperinflation
1-2
1993
17
289
317
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)80013-8
Imrohoroglu, Selahattin
oai:RePEc:eee:dyncon:v:30:y:2006:i:9-10:p:1755-17862014-08-08RePEc:eee:dyncon
article
Asset price and wealth dynamics in a financial market with heterogeneous agents
9-10
2006
30
1755
1786
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00061-3
Chiarella, Carl
Dieci, Roberto
Gardini, Laura
oai:RePEc:eee:dyncon:v:31:y:2007:i:2:p:669-6822014-08-08RePEc:eee:dyncon
article
Local determinacy with non-separable utility
2
2007
31
2
669
682
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00037-6
Pintus, Patrick A.
oai:RePEc:eee:dyncon:v:24:y:2000:i:11-12:p:1499-15252014-08-08RePEc:eee:dyncon
article
Binomial valuation of lookback options
11-12
2000
24
10
1499
1525
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00085-8
Babbs, Simon
oai:RePEc:eee:dyncon:v:19:y:1995:i:1-2:p:59-892014-08-08RePEc:eee:dyncon
article
A generalized variance bounds test with an application to the Holt et al. inventory model
1-2
1995
19
59
89
http://www.sciencedirect.com/science/article/pii/0165-1889(93)00775-Y
Kollintzas, Tryphon
oai:RePEc:eee:dyncon:v:28:y:2004:i:8:p:1625-16342014-08-08RePEc:eee:dyncon
article
Industrialization and substitutability: a note
8
2004
28
6
1625
1634
http://www.sciencedirect.com/science/article/pii/S0165-1889(03)00155-6
Yamada, Masao
oai:RePEc:eee:dyncon:v:21:y:1997:i:10:p:1699-17252014-08-08RePEc:eee:dyncon
article
On the dynamic selection of mechanisms for provision of public projects
10
1997
21
8
1699
1725
http://www.sciencedirect.com/science/article/pii/S0165-1889(97)00044-4
Lagunoff, Roger
oai:RePEc:eee:dyncon:v:34:y:2010:i:4:p:657-6802014-08-08RePEc:eee:dyncon
article
Contract adjustment under uncertainty
Consider trade in continuous time between two players. The gains from trade are divided according to a contract, and at each point in time, either player may unilaterally induce a costly adjustment of the contract. Players' payoffs from trade under the contract, as well as from trade under an adjusted contract, are exogenous and stochastic. We consider players' choice of whether and when to adjust the contract payment. We show that there exists a Nash equilibrium in thresholds, where each player adjusts the contract whenever the contract payment relative to the outcome of an adjustment passes the threshold. There is strategic substitutability in the choice of thresholds, so that if one player becomes more active by choosing a threshold closer to unity, the other player becomes more passive.
Contract adjustment Adjustment costs Renegotiation Differential games (S,s) strategy
4
2010
34
4
657
680
http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00209-7
Holden, Helge
Holden, Lars
Holden, Steinar
oai:RePEc:eee:dyncon:v:37:y:2013:i:5:p:964-9832014-08-08RePEc:eee:dyncon
article
Optimal lending contracts with long run borrowing constraints
This paper discusses two variations to the optimal lending contract under asymmetric information studied in Clementi and Hopenhayn (2006). One variation assumes that the entrepreneur is less patient than the bank, and the other assumes the bank has limited commitment. The qualitative properties of the two modified contracts are very similar. In particular, both variations lead to borrowing constraints that are always binding such that the firm is financially constrained throughout its life cycle and subject to a positive probability of being liquidated eventually.
Optimal lending contract; Borrowing constraints; Asymmetric information; Limited commitment; Impatient entrepreneur;
5
2013
37
964
983
G3
L2
D21
http://www.sciencedirect.com/science/article/pii/S0165188913000110
Li, Shuyun May
oai:RePEc:eee:dyncon:v:30:y:2006:i:4:p:655-6852014-08-08RePEc:eee:dyncon
article
On taxation in a two-sector endogenous growth model with endogenous labor supply
4
2006
30
4
655
685
http://www.sciencedirect.com/science/article/pii/S0165-1889(05)00058-8
de Hek, Paul A.
oai:RePEc:eee:dyncon:v:22:y:1998:i:8-9:p:1187-12072014-08-08RePEc:eee:dyncon
article
The evolution of type communication in a sender/receiver game of common interest with cheap talk
8-9
1998
22
8
1187
1207
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00009-8
Arifovic, Jasmina
Eaton, B. Curtis
oai:RePEc:eee:dyncon:v:31:y:2007:i:7:p:2374-23972014-08-08RePEc:eee:dyncon
article
On sustainable growth and collapse: Optimal and adaptive paths
7
2007
31
7
2374
2397
http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00149-7
Dawid, Herbert
Day, Richard H.
oai:RePEc:eee:dyncon:v:27:y:2003:i:6:p:907-9082014-08-08RePEc:eee:dyncon
article
High-performance computing for financial planning
6
2003
27
4
907
908
http://www.sciencedirect.com/science/article/pii/S0165-1889(02)00040-4
Zenios, Stavros A.
oai:RePEc:eee:dyncon:v:35:y:2011:i:1:p:80-962014-08-08RePEc:eee:dyncon
article
Asset prices in an exchange economy when agents have heterogeneous homothetic recursive preferences and no risk free bond is available
We study a pure exchange economy under incomplete markets where households have heterogeneous homothetic recursive preferences and lending and borrowing are precluded. We fully characterize the properties of the efficient allocations and the equilibrium asset price. The ownership distribution dynamics reveal the emergence of a dominant agent, who after some finite time, remains the only investor that increases asset holdings until asymptotically owning the entire wealth. Investors can be ranked according to a unique parameter that aggregates agents' preference characteristics and we show how time discount rate, attitude towards risk and intertemporal substitution contribute to capital accumulation.
Recursive preferences Heterogeneous agents General equilibrium Ownership distribution
1
2011
35
1
80
96
http://www.sciencedirect.com/science/article/pii/S0165-1889(10)00173-9
Roche, Hervé
oai:RePEc:eee:dyncon:v:32:y:2008:i:7:p:2137-21472014-08-08RePEc:eee:dyncon
article
Note on positive lower bound of capital in the stochastic growth model
In the context of the classical stochastic growth model, we provide a simple proof that the optimal capital sequence is strictly bounded away from zero whenever the initial capital is strictly positive. We assume that the utility function is bounded below and the shocks affecting output are bounded. However, the proof does not require an interval shock space, thus, admitting both discrete and continuous shocks. Further, we allow for finite marginal product at zero capital. Finally, we use our result to show that any optimal capital sequence converges globally to a unique invariant distribution, which is bounded away from zero.
7
2008
32
7
2137
2147
http://www.sciencedirect.com/science/article/pii/S0165-1889(07)00220-5
Chatterjee, Partha
Shukayev, Malik
oai:RePEc:eee:dyncon:v:24:y:2000:i:11-12:p:1591-16212014-08-08RePEc:eee:dyncon
article
Robust min-max portfolio strategies for rival forecast and risk scenarios
11-12
2000
24
10
1591
1621
http://www.sciencedirect.com/science/article/pii/S0165-1889(99)00088-3
Rustem, Berc
Becker, Robin G.
Marty, Wolfgang
oai:RePEc:eee:dyncon:v:23:y:1999:i:5-6:p:747-7722014-08-08RePEc:eee:dyncon
article
Export promotion, learning by doing and growth
5-6
1999
23
4
747
772
http://www.sciencedirect.com/science/article/pii/S0165-1889(98)00042-6
Ambler, Steve
Cardia, Emanuela
Farazli, Jeannine
oai:RePEc:eee:dyncon:v:36:y:2012:i:4:p:536-5492014-08-08RePEc:eee:dyncon
article
Sustainability and substitution of exhaustible natural resources
We study long-run growth in a multi-sector economy with non-renewable resource use and endogenous innovations. Unlike recent capital resource models, we find that poor input substitution need not be detrimental for sustainable growth; on the contrary, combined with resource depletion it fosters structural change, which helps to sustain research investments. We derive the properties of the transition path, show which sectors survive in the long run, and discuss whether the economy approximates a steady state with or without a scale effect. The results continue to hold when some sectors exhibit perfect competition.
Growth; Non-renewable resources; Substitution; Investment incentives; Endogenous technological change; Sustainability;
4
2012
36
536
549
Q20
Q30
O41
O33
http://www.sciencedirect.com/science/article/pii/S016518891100217X
Bretschger, Lucas
Smulders, Sjak
oai:RePEc:eee:dyncon:v:30:y:2006:i:11:p:2117-21412014-08-08RePEc:eee:dyncon