Measuring of party system stability in Eastern Europe during the first decade of democratic elections presents problems. The traditional quantitative measure – volatility – does not distinguish between the dynamics among incumbent parties and the rise of genuinely new ones. I propose a new additional measure – success of genuinely new parties – and compare it to volatility. The subsequent perfo...

This paper considers horizon effects on portfolio weights under time varying and forecastable return volatility. The return volatility is modelled as a GARCH-M, which is general enough to encompass both constant and time varying mean. The analysis confirms earlier results, namely that there are no horizon effects when the stochastic process, that governs asset returns, has constant mean. Howeve...

In this paper we explore the influence of inflation rigidity on the monetary policy transmission mechanism in a model featuring the hybrid Phillips curve. We compare the New Keynesian Phillips curve and the hybrid Phillips curve for their contribution to reproducing stylized empirical facts about business cycles driven by monetary policy shocks. Variables’ induced volatility and the dynamics of...

The global financial crisis began with a financial meltdown in the United States in early 2008 and then it had spread to the rest of the world. In this paper we test whether the MENA equity market volatility presents a different behavior before and after the financial crisis of 2008. Using long range dependence techniques we test for long memory in the returns, absolute and squared returns of t...

Even though labor income represents about two thirds of disposal income to household, its role has largely been neglected by asset pricing models. In this paper, we solve a general equilibrium model which can both rationalize important feature of labor markets as well as financial markets. To this end, we embed labor market search frictions into a business cycle model where the representative h...

For the first time in the asset pricing literature a direct link is drawn between asset prices and the financial volume of trade within a dynamic general equilibrium model with disagreement. The model exhibits two risk averse agents that hold heterogeneous beliefs about the conditional mean of the only source of macroeconomic risk, the aggregate consumption growth. The differences in opinions i...

This paper analyzes the quantitative importance of adaptive learning in business cycle fluctuations. We first introduce adaptive learning in a real business cycle model and a New Keynesian model, using specifications drawn from the literature which assume that agents learn about the equilibrium laws of motion. We consider a variety of learning rules, and find that in both environments learning ...

This study explores theoretical properties of the self-confirming equilibrium in the standard growth model. When rational expectations are replaced by adaptive expectations, we prove that the self-confirming equilibrium is the same as the steady state rational expectations equilibrium, but that the dynamics around the steady state are substantially different between the two equilibria. Learning...

We provide empirical evidence of volatility forecasting in relation to asymmetries present in the dynamics of both return and volatility processes. Using recently-developed methodologies to detect jumps from high frequency price data, we estimate the size of positive and negative jumps and propose a methodology to estimate the size of jumps in the quadratic variation. The leverage effect is sep...

We incorporate long-term defaultable corporate bonds and credit risk in a dynamic stochastic general equilibrium business cycle model. Credit risk amplifies aggregate technology shocks. The debt-capital ratio is a new state variable and its endogenous movements provide a propagation mechanism. The model can match the persistence and volatility of output growth as well as the mean equity premium...