Stochastic adaptive dynamics require analytical methods and solution concepts that differ in important ways from those used to study deterministic processes. Consider, for example, the notion of asymptotic stability: in a deterministic dynamical system, a state is locally asymptotically stable if all sufficiently small deviations from the original state are self‐correcting. We can think of this...

abstract in this paper we test two versions of convergence hypothesis namely deterministic or conditional convergence and stochastic or catching up hypothesis using carrion-i-silvestre et al. (2005) stationary test. the results show latin and south american countries (lsa) catching up process toward the usa failed in 1980s and somewhat in 1990s. but in 2000s most of them could lie in convergenc...

The extent to which there are aggregate returns to scale at the level of aggregate production has important implications both for the types of shocks generating business cycles and for optimal policy. However, prior attempts to measure the extent of these returns using instrumental variable techniques have yielded quite imprecise estimates. In this article, we show that the production shocks im...

To quantify trade frictions, we examine multiproduct exporters. We build a flexible general-equilibrium model and estimate market entry costs using Brazilian firm-product-destination data under rich demand access cost shocks. Our estimates show that additional products farther from firm’s core competency come at higher production costs, but there are substantive economies of scope in costs. Mar...

Price changes and output growth, both at the aggregate and the sectoral level, appear to be negatively correlated. At a basic level, this suggests that sectoral “supply” shocks are more prevalent than sectoral “demand” shocks. However, it is not clear what these sectoral price-output correlations mean once one thinks in terms of general equilibrium. To help us understand the implication of thes...

Our aim is to examine whether sectorial production shocks have predominated in Mexico’s long annual real output, and whether shocks from different sectors are correlated. We study the long-run movement and comovements of 6 production sectors, using long, low frequency data for the Mexican economy from 1921 to 1993 and Johansen’s (1991, 1995) method to test for cointegration, that is, the possib...

Multistage stochastic programming is a key technology for making decisions over time in an uncertain environment. One of the promising areas in which this technology is implementable, is medium term planning of electricity production and trading where decision makers are typically faced with uncertain parameters (such as future demands and market prices) that can be described by stochastic proc...

This paper studies U.S. in‡ation adjustment speed to aggregate technology shocks and to monetary policy shocks in a medium size Bayesian VAR model. According to the model estimated on the 1959-2007 sample, in‡ation adjusts much faster to aggregate technology shocks than to monetary policy shocks. These results are robust to di¤erent identi…cation assumptions and measures of aggregate prices. Ho...