There is a range of formal approaches to the modelling of policy responses. This paper will give a very short summary of the broad approaches, which are currently used, then a new approach will be proposed. The main objective of this paper is to explain the motivation and workings of a new algorithm, which allows the calculation of optimal feedback rules designed to minimise the variance of the...

The 1960s were an exciting time – at least for macroeconomic modelers. An impressive new kind of macroeconometric model was entering central banking, and cutting-edge central banks were beginning to analyze policy as a problem of optimal control. The December 1965 edition of Time, the popular U.S. news magazine, has Keynes on the cover, quotes the experts of the day extensively, and is almost g...

The aim of this paper is to provide exact inference in nite sample for econometric models whose likelihood function is intractable and require thereby simulation-based estimation method like Indirect Inference Method or E cient Method of Moments. To do so, we resort to the technique of Monte Carlo Tests which naturally applies to any simulable model. In particular, maximized Monte Carlo tests a...

It has long been a theme of real estate professionals that real estate markets are economically fragmented. These markets are presumed to be characterized by product differentiation, by small and isolated sub-pools of participants, and by market segmentation. This view is intuitively compelling, but sobering. It taints the prospects for modern econometric forecasting of office markets because e...

In a recent paper, Newell and Pizer (2003) (N&P) build upon Weitzman (1998, 2001) and show how uncertainty about future interest rates leads to ‘certainty equivalent’ forward rates (CER) that decline with the time horizon. Such Declining Discount Rates (DDR’s) have important implications for the economic appraisal of the long-term policy arena (e.g. climate change) and inter-generational equity...

This paper reconsiders the conventional use of econometric models, especially identified vector autoregressive models, in guiding monetary policy. The main question I explore is whether these models are seriously flawed because they ignore asymmetries in the business cycles. Toward that end, models that allow for asymmetric business cycles—defined by the case where recessions and expansions are...

This paper builds a comprehensive model that treats trade credit as the interaction of financing, operations, marketing and default-risk management. Our model is featured by using a two-stage lottery method to describe default risk, in the context of which the incentive-compatible model is formulated. We find that the capital cost of the supplier is the most important factor determining the cre...

An understanding of volatility in stock markets is important for determining the cost of capital and for assessing investment and leverage decisions as volatility is synonymous with risk. Substantial changes in volatility of financial markets are capable of having significant negative effects on risk averse investors. Using daily returns from 1992 to 2002, we investigate volatility co-movement ...

We provide a tractable characterization of the sharp identification region of the parameter vector θ in a broad class of incomplete econometric models. Models in this class have set-valued predictions that yield a convex set of conditional or unconditional moments for the observable model variables. In short, we call these models with convex moment predictions. Examples include static, simultan...

This paper considers the problems facing decision makers using econometric models in real time. It identifies the key stages involved and highlights the role of automated systems in reducing the effect of data snooping. It sets out many choices that researchers face in construction of automated systems and discusses some of the possible ways advanced in the literature for dealing with them. The...