This paper presents a potential solution to the home bias puzzle based on a new open economy macroeconomics model. In response to technology shocks, sticky prices generate a negative correlation between labor income and the profits of domestic firms, leading to home bias in equity holdings. In contrast, under flexible prices, labor income and the profits of the domestic firms are positively cor...

This paper studies whether the central bank should adjust its inflation target to account for the systematic upward bias in measured inflation due to quality improvements in consumption goods. We show that the answer to this question depends on what prices are assumed to be sticky. If nonquality-adjusted prices are assumed to be sticky, then the inflation target should not be corrected. If, on ...

I examine the long-run behavior of oil, coal, and natural gas prices, using up to 127 years of data, and address the following questions: What does over a century of data tell us about the stochastic dynamics of price evolution, and how it should be modeled? Can models of reversion to stochastically fluctuating trend lines help us forecast prices over horizons of 20 years or more? And what do t...

We analyze an independent private values model where a number of objects are sold in sequential firstand second-price auctions. Bidders have unit demand and their valuation for an object is decreasing in the rank number of the auction in which it is sold. We derive efficient equilibria if prices are announced after each auction or if no information is given to bidders. We show that the sequence...

. . .Because of the interrelationships among crops, a major shortfall in the U.S. harvest could tip global grain and soy markets into chaos. It would affect the prices of food made directly from these commodities, such as bread, pasta and tortillas, and food made indirectly, such as pork, poultry, beef, milk and eggs. . . ‘The rest of the world is less able to pay high prices for food. What’s a...

Commodity prices are in the news. Oil prices have dropped 65% since June 2014. Metal prices are also down substantially, albeit they have declined more gradually since 2011 on account of slower growth from emerging markets that account for more than half of global metal consumption. In this special issue, we focus on food prices, which have in many ways a wider impact than oil prices. While int...

The paper proposes the use of the growth optimal portfolio for pricing and hedging in incomplete markets when there are unobserved factors that have to be filtered. The proposed filtering framework is applicable also in cases when there does not exist an equivalent risk neutral martingale measure. The reduction of the variance of derivative prices for increasing degrees of available information...

High prices are their own worst enemy. Increased profi t margins entice entrepreneurial investment, which results in increased production. Lower market prices inevitably follow. The magic hand of Adam Smith ensures that winners’ gains and losers’ losses will be temporary, as entrepreneurs correct market imbalances. The temporary nature of high prices is well known to corn, soybean, and wheat fa...

Special Issue: Causes and Consequences of the Food Price Crisis Biofuel production in the United States has been ridiculed in recent months, following the release of reports that suggest ethanol and biod­ iesel not only increase greenhouse gas emissions relative to fossil fuels, but also raise food prices and lower food production. The impact of biofuels on food markets came under particular sc...

The Impact of Refugee Crises on Host Labor Markets: The Case of the Syrian Refugee Crisis in Turkey The civil war in Syria has culminated into major refugee crises in its neighboring countries. By the end of 2013 more than half a million people were seeking shelter in cities and refugee camps in Turkey. We analyze how the Syrian refugee influx in Turkey has affected food and housing prices, emp...