Related papers: Empirical evidence on the Euler equation for inves…

Dynamic stochastic general equilibrium (DSGE) models have been an ubiquitous, and controversial, part of macroeconomics for decades. In this paper, we approach DSGEs purely as statstical models. We do this by applying two common model…

A number of macroeconomic theories, very popular in the 1980s, seem to have completely disappeared and been replaced by the dynamic stochastic general equilibrium (DSGE) approach. We will argue that this replacement is due to a tacit…

The Euler scheme is one of the standard schemes to obtain numerical approximations of stochastic differential equations (SDEs). Its convergence properties are well-known in the case of globally Lipschitz continuous coefficients. However, in…

The paper discusses capital allocation using the Euler formula and focuses on the risk measures Value-at-Risk (VaR) and Expected shortfall (ES). Some new results connected to this capital allocation is known. Two examples illustrate that…

This paper examines the question whether information is contained in forecasts from DSGE models beyond that contained in lagged values, which are extensively used in the models. Four sets of forecasts are examined. The results are…

Despite the fact that the Euler allocation principle has been adopted by many financial institutions for their internal capital allocation process, a comprehensive description of Euler allocation seems still to be missing. We try to fill…

We investigate a multi-household DSGE model in which past aggregate consumption impacts the confidence, and therefore consumption propensity, of individual households. We find that such a minimal setup is extremely rich, and leads to a…

As a well-known fact, the classical Euler scheme works merely for SDEs with coefficients of linear growth. In this paper, we study a general framework of modified Euler schemes, which is applicable to SDEs with super-linear drifts and…

We consider the Euler scheme for stochastic differential equations with jumps, whose intensity might be infinite and the jump structure may depend on the position. This general type of SDE is explicitly given for Feller processes and a…

We consider numerical approximations of stochastic differential equations by the Euler method. In the case where the SDE is elliptic or hypoelliptic, we show a weak backward error analysis result in the sense that the generator associated…

This paper characterizes DSGE models as fixed-point selection devices for self-referential economic specifications. We formalize this structure as $(S, T, \Pi)$: specification, self-referential operator, and equilibrium selector. The…

Aggregate shocks affect most households' and firms' decisions. Using three stylized models we show that inference based on cross-sectional data alone generally fails to correctly account for decision making of rational agents facing…

It is widely recognized that the existing parameter estimators and adaptive controllers for robot manipulators are extremely complicated to be of practical use. This is mainly due to the fact that the existing parameterization includes the…

We introduce an equilibrium asset pricing model, which we build on the relationship between a novel risk measure, the Expected Downside Risk (EDR) and the expected return. On the one hand, our proposed risk measure uses a nonparametric…

How do macro-financial shocks affect investor behavior and market dynamics? Recent evidence on experience effects suggests a long-lasting influence of personally experienced outcomes on investor beliefs and investment, but also significant…

Dynamic Stochastic General Equilibrium (DSGE) models are nowadays a crucial quantitative tool for policy-makers. However, they did not emerge spontaneously. They are built upon previously established ideas in Economics and relatively recent…

Does euro adoption affect long-run economic growth? Existing evidence is mixed, reflecting limited treated countries, long horizons that challenge inference, and heterogeneity across member states. We estimate causal dynamic and…

This paper shows that diagnostic expectations (DE) and rational expectations (RE) are not observationally equivalent in dynamic stochastic general equilibrium (DSGE) models. Using the frequency-domain framework of Qu and Tkachenko (2012,…

We use supervised learning to identify factors that predict the cross-section of returns and maximum drawdown for stocks in the US equity market. Our data run from January 1970 to December 2019 and our analysis includes ordinary least…

We present a criterion for uniform in time convergence of the weak error of the Euler scheme for Stochastic Differential equations (SDEs). The criterion requires i) exponential decay in time of the space-derivatives of the semigroup…