Testing Ricardian Neutrality with an Intertemporal Stochastic Model

Appendix to An Intertemporal CAPM with Stochastic Volatility

Testing Long-Run Neutrality

K ey classical macroeconomic hypotheses specify that permanent changes in nominal variables have no effect on real economic variables in the long run. The simplest “long-run neutrality” proposition specifies that a permanent change in the money stock has no long-run consequences for the level of real output. Other classical hypotheses specify that a permanent change in the rate of inflation has...

Testing Intertemporal Rational Expectations Model with State Uncertainty: An Application to the Permanent Income Hypothesis

In this paper we take a different modeling approach based on the component driven (CD) model developed in Kuan, Huang, and Tsay (2003) to test the permanent income hypothesis (PIH), an example of intertemporal choice models. A key feature of this approach is that it explicitly allows for state uncertainty. By assuming that the labor income follows a CD process, we show that the agent’s percepti...

Prediction with Model-Based Neutrality

With recent developments in machine learning technology, the predictions by systems incorporating machine learning can now have a significant impact on the lives and activities of individuals. In some cases, predictions made by machine learning can result unexpectedly in unfair treatments to individuals. For example, if the results are highly dependent on personal attributes, such as gender or ...

An Intertemporal Model of Saving and Investment

The standard model of optimal growth, interpreted as a model of a market economy with infinitely long-lived agents, does not allow separation of the savings decisions of agents from the investment decisions of firms. Investment is essentially passive: the "one good" assumption leads to a perfectly elastic investment supply; the absence of installation costs for investment leads to a perfectly e...