In this paper, we study the potential of stocks as a hedge against inflation for different investment horizons. We show that stocks can be a hedge against inflation even if stock returns are negatively correlated with unexpected inflation shocks, and only moderately positively related to expected inflation. Depending on the investment horizon, the optimal hedge ratio can be either positive or n...

Define the riskiness of a gamble as the reciprocal of the absolute risk aversion (ARA) of an individual with constant ARA who is indifferent between taking and not taking that gamble. We characterize this index by axioms, chief among them a “duality” axiom which, roughly speaking, asserts that less risk-averse individuals accept riskier gambles. The index is homogeneous of degree 1, monotonic w...

 Up to now, the impact of real exchange rate on the non-oil exports of Iran has been mainly on focus. However, the more important aspect of the fluctuations in exchange rate is its degree of volatility which can have profound effect on the non-oil exports. Hence, the main objective of this paper is to investigate the linkage between non-oil exports and the real exchange rate volatility for Iran...

This paper proposes an alternative explanation to recurrent hyperinflations other than bounded rationality by explicitly considering the global dynamics of an economy with credit market frictions. In this paper we show that hyperinflations are self-generated and are manifestations of the underlying global dynamic properties of an economy with perfect foresight rational agents that face credit r...

We analyze the impact of news (information shocks) in economies where liquidity plays a role. While we also consider news about real factors, like productivity, one motivation is that central bank announcements evidently affect markets, as taken for granted by advocates of forward guidance policy. The dynamic effects can be complicated, with information about monetary policy or real factors aff...

We develop a new general equilibrium growth accounting framework that features increasing returns to scale, imperfect competition and incorporates technological revolutions into the description of technical progress. We propose a way to tell apart revolutionary changes in technology and incremental innovations using stock market data. We use our framework to jointly estimate the overall embodie...

In this study a regime switching approach is applied to estimate the chartist and fundamentalist (c&f) exchange rate model originally proposed by Frankel and Froot (1986). The empirical results suggest that this model does successfully explain daily DM/Dollar forward exchange rate dynamics from 1982 to 1998. Moreover, our findings turned out to be relative robust by estimating the model in subs...

We study the effects of firm’s credit condition on (1) labor market performance and (2) the inflation and unemployment relationship, in a new monetarist model. Better credit condition has positive impact on labor market as firms save on financing cost, improve profitability, and thus create more vacancies. Inflation increases the financing cost and thus discourages job creation. On the other ha...

An overview is given of the utilization of strategic market games in the development of a game theory based theory of money and financial institutions. JEL Classifications: C72, C73, E44

A panel of ex-ante forecasts of a single time series is modeled as a dynamic factor model, where the conditional expectation is the single unobserved factor. When applied to out-of-sample forecasting, this leads to combination forecasts that are based on methods other than OLS. These methods perform well in a Monte Carlo experiment. These methods are evaluated empirically in a panel of simulate...