The Identification and Economic Content of Ordered Choice Models with Stochastic Thresholds This paper extends the widely used ordered choice model by introducing stochastic thresholds and interval-specific outcomes. The model can be interpreted as a generalization of the GAFT (MPH) framework for discrete duration data that jointly models durations and outcomes associated with different stoppin...

We consider the optimal nonlinear income taxation problem in a dynamic, stochastic environment when the government cannot change the tax rule as uncertainty resolves. Due to such a stationarity constraint, our taxation problem is reduced to a static one over an expanded type space. We strengthen the argument in the static model that the zero topmarginal tax rate result is of little practical im...

This study aims to evaluate the effect of sentiments on Iran's economy through a New Keynesian Dynamic Stochastic General Equilibrium model in a closed economy. In this study, the coefficients of the proposed model are calibrated and estimated using the quarterly data of Iran's economy from 2004 to 2015. It shows that in the presence of sentiment, how stochastic impulses affect the main macroec...

In the Value Added Tax (VAT) system some goods and services, such as banking services, are exempted from taxes. Based on theoretical foundations, exempt treatment leads to several distortions and inefficiencies in the economy. In order to understand the importance of exemption on macroeconomic fluctuations as well as the fundamental role of financial intermediaries in economy shocks, this study...

This paper characterizes properties of chance attitudes (nonadditive measures). It does so for decision under uncertainty (unknown probabilities), where it assumes Choquet expected utility, and for decision under risk (known probabilities), where it assumes rank-dependent utility. It analyzes chance attitude independently from utility. All preference conditions concern simple violations of the ...

The correspondence principle suggests a link between asymptotic stability properties of equilibria of economic models and the equilibrium response to data that describe the model or the model environment. However, this link has been impaired by a logical-mathematical deficiency. This paper, by introducing a conceptual requirement of (local) structural stability as part of the principle hypothes...

Most studies that emphasize and encourage the shift towards a less regulated and financially open system rest on the premise of a prosperous growth prospect. Accordingly, interests have focused on growth models as a framework to understand and to analyze the effects of economic freedom. In this paper, we investigate the short-run characteristics of economic freedom. Using a stochastic general e...

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Open economy macroeconomics typically abstracts from portfoli...

We study the impact of unobservable stochastic replacements for the long-run player in the classical reputation model with a long-run player and a series of short-run players. We provide explicit lower bounds on the Nash equilibrium payoffs of a long-run player, both ex-ante and following any positive probability history. Under general conditions on the convergence rates of the discount factor ...