Showing papers in "Journal of Economic Dynamics and Control in 2012"

TL;DR: In this article, the authors show 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, and 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 agents counterparties.

TL;DR: In this paper, the authors start 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.

TL;DR: In this article, a mean quadratic variation objective function is used to determine an optimal trading strategy in the presence of price impact, assuming the underlying asset follows geometric Brownian motion (GBM) or arithmetic Brownian Motion (ABM), and the exact solution of the ABM formulation is in fact identical to the static (priceindependent) approximate solution for the mean-variance objective function in Almgren and Chriss (2000).

TL;DR: In this article, the authors present some topological metrics for the interbank exposures and the payments system networks and draw important conclusions from the systemic risk's perspective and propose a measure of interconnectedness, which can be used to determine the importance of a bank in terms of connectivity.

TL;DR: In this paper, the impact of the European Economic Recovery Plan (EERP) on the euro area GDP was quantified. But, since the EERP comprised both revenue and expenditure-based fiscal stimulus measures, the total multiplier is below unity.

TL;DR: In this paper, the effects of tax-based vs. expenditure-based fiscal consolidation in a currency union were examined using a two-country DSGE model, and the authors found that, given limited scope for monetary accommodation, taxbased consolidation tends to have smaller adverse effects on output than expenditurebased consolidation in the near-term, though is more costly in the longer run.

TL;DR: In this article, the authors trace four origins of agent-based computational economics (ACE), namely, the markets origin, the cellular-automata origins, the tournaments origin, and the experiments origin.

TL;DR: In this article, the shape of the yield curve is modelled by latent factors corresponding to its level, slope and curvature, estimated by maximum likelihood with the Kalman filter.

TL;DR: In this article, the authors developed a simple model that sheds light on how network topology interacts with the funding structure of financial institutions to determine system-wide crises, showing how the arrival of bad news about a financial institution leads others to lose confidence in it and how this, in tu rn, spreads across the entire interbank network.

TL;DR: In this paper, the authors 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.

TL;DR: The authors found that adverse credit shocks have contributed to declining output in every post-1982 recession and account for three-fifths of the decline in output during the 2007-2009 contraction.

TL;DR: This paper studied the effects of the Maastricht Treaty, the creation of the ECB and the Euro changeover on the dynamics of European business cycles using a panel VAR and data from 10 European countries.

TL;DR: In this paper, the authors quantify the short-run and long-run price effect of posting a limit order in an order book market by proposing a high-frequency cointegrated VAR model for quotes and order book depth.

TL;DR: In this article, Monte-Carlo analysis is employed to examine the small-sample properties of simulated method of moments (SMM) in specifications with different curvatures and departures from certainty equivalence.

TL;DR: The authors argue that the stock market crash of 2008, triggered by a collapse in house prices, caused the Great Recession and provide evidence that fiscal stimulus will not permanently restore full employment. But aggregate demand depends on wealth, not on income.

TL;DR: This paper proposed a theoretical framework to investigate economic robustness to exogenous shocks such as natural disasters, based on a dynamic model that represents a regional economy as a network of production units through the disaggregation of sector-scale input-output tables.

TL;DR: In this paper, the authors present an experiment where the fundamental price experiences large unexpected shocks and show that markets with negative expectation feedback (strategic substitutes) quickly converge to the new fundamental price, while markets with positive expectation feedback do not converge, but show underreaction in the short run and over reaction in the long run.

TL;DR: In this paper, the authors evaluate the empirical relevance of learning by private agents in an estimated medium-scale DSGE model and propose a constant gain learning mechanism to improve the marginal likelihood of the model.

TL;DR: In this paper, an analytical approach that facilitates understanding the bifurcation mechanism of a wide class of economic models involving spatial agglomeration of economic activities is presented. But the proposed method is limited to the multi-regional core-periphery (CP) model.

TL;DR: In this paper, the empirical density of firm profit rates, measured as returns on assets, is markedly non-Gaussian and reasonably well described by an exponential power (or Subbotin) distribution.

TL;DR: In this paper, the authors complement the transitional analysis of the short-run costs with a rigorous welfare evaluation and show that, despite the long-lasting economic downturn, disin‡ation entails non-zero overall welfare gains.

TL;DR: In this paper, a simple model of managing a system subject to pollution damage, such as climate change, under the risk of an abrupt and random jump in the damage function is developed.

TL;DR: In this article, the authors propose a re-parameterization approach to the problem of normalization, calibration, and estimation of CES production functions, in which the share parameters are not in fact shares, but depend on underlying dimensions.

TL;DR: In this paper, the authors combine survey forecasts with a heterogeneous agent model to examine the dispersion of expectations of participants in the foreign exchange market and find distinct variations in the level of dispersion and document that dispersion arises because of the combined effect of market participants holding private information and attaching different weights to fundamental, technical, and carry trade analyses.

TL;DR: For models with nontrivial nonlinearities, the proposed perturbation-based approximation gives a good qualitative insight in the nonlinear aspects of the true solution, but can differ from thetrue solution in some quantitative aspects, especially during severe peaks and troughs.

TL;DR: In this article, the progress of spatial agglomeration of Krugman's core-periphery model is investigated by comparative static analysis of stable equilibria with respect to transport costs.

TL;DR: In this paper, the authors show that the value function of the maximin problem can be obtained in the viability framework, and that the optimal maximin path is a particular viable path.

TL;DR: In this paper, the authors use weekly survey data on short-term and medium-term sentiment of German investors to estimate the parameters of a stochastic model of opinion formation governed by social interactions.

TL;DR: In this article, the authors investigated whether a regime switching model of stochastic lumber prices is better for the analysis of optimal harvesting problems in forestry than a more traditional single regime model.

TL;DR: In this article, the authors extended the analysis of the seminal work of Brock and Hommes on heterogeneous beliefs and rational routes to randomness in discrete-time models to a continuous-time model of asset pricing.