We implement an endogeneous switching-regression model for labour productivity and firms’ decision to use business–to–business (B2B) e–commerce. Our approach allows B2B usage to affect any parameter of the labour productivity equation and to properly take account of strategic complementarities between the input factors and B2B usage. Empirical evidence from 1,394 German firms shows that firms u...

We study infinite–horizon, optimal switching problems under a general class of stochastic volatility models that exhibit “fast” mean–reversion by using techniques from homogenisation theory. This leads to perturbation theory, providing closed–form approximations to the full switching problem which is often intractable, both analytically and numerically. We apply our general results to certain, ...

This paper derives the dynamic programming equation (DPE) to a differentiable Markov Perfect equilibrium in a problem with non-constant discounting and general functional forms. Beginning with a discrete stage model and taking the limit as the length of the stage goes to 0 leads to the DPE corresponding to the continuous time problem. The note discusses the multiplicity of equilibria under non-...

Non-strategic firms with rational expectations make investment and emissions decisions. The investment rule depends on firms’ beliefs about future emissions policies. We compare emissions taxes and quotas when the (strategic) regulator and (nonstrategic) firms have asymmetric information about abatement costs, and all agents use Markov Perfect decision rules. Emissions taxes create a secondary ...

This paper extends the real interest differential (RID) model of Frankel (1979) by introducing Markov regime switches for three exchange rates over the years 1973 2000. Evidence of a non-linear relationship between exchange rates and underlying fundamentals is provided. One of the regimes represents exactly the RID case. Decisive fundamentals in determining regimes turn out to be mainly interes...

This paper develops a dynamic model of an economy in which homogeneous agents choose between specializing as producers or as merchants, and can change occupation at any time. Merchants operate alongside a decentralized search market and provide immediacy in exchange in return for a price. We characterize equilibria in symmetric Markov strategies, and derive conditions under which merchants and ...

A general Markov-Switching autoregressive conditional mean model, valued in the set of non-negative numbers, is considered. The distribution this model a finite mixture distributions whose follows GARCH-like dynamics with parameters depending on state Markov chain. Three different variants are examined how lagged-values mixing variable integrated into equation. includes, particular, versions va...

This paper extends Woodford’s (2010) approach to the robustly monetary policy to a general linear quadratic framework. We provide algorithms to solve for a time-invariant linear robustly optimal policy from a timeless perspective and for a time-invariant linear Markov perfect equilibrium under discretion. We apply our methods to a New Keynesian model of monetary policy with persistent cost-push...

This paper is concerned with the problems of posterior simulation and model choice for Poisson panel data models with multiple random effects. Efficient algorithms based on Markov chain Monte Carlo methods for sampling the posterior distribution are developed. A new parameterization of the random effects and fixed effects is proposed and compared with a parameterization in common use, and compu...