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The potential for rare economic disasters explains a lot of asset-pricing puzzles. I calibrate disaster probabilities from the twentieth century global history, especially the sharp contractions associated with World War I, the Great Depression, and World War II. The puzzles that can be explained include the high equity premium, low risk-free rate, and(More)
Over the last twenty years, the open source community has provided more and more software on which the world's High Performance Computing (HPC) systems depend for performance and productivity. The community has invested millions of dollars and years of effort to build key components. But although the investments in these separate software elements have been(More)
Lance Lochner generously provided their life cycle estimates of worker-financed training time. Abstract Most studies of the intertemporal substitution of work use life cycle data and, from those studies, many have concluded that intertemporal labor substitution is unimportant for macroeconomics. This paper takes another look at life cycle data and argues(More)
A large literature documents that several economic decisions occur infrequently. For instance, individual investors adjust their portfolios sporadically even though the prices of many assets experience large fluctuations at high frequency. Similarly, firms do not reset the price every time the costs of inputs change. These infrequent adjustments at the(More)
1 We model the decisions of a multiproduct firm that faces a fixed " menu " cost: once it is paid, the firm can adjust the price of all its products. We characterize analytically the steady state firm's decisions in terms of the structural parameters: the variability of the flexible prices, the curvature of the profit function, the size of the menu cost,(More)
We propose a constructive, multivariate framework for assessing agreement between (generally misspecified) dynamic equilibrium models and data, which enables a complete second-order comparison of the dynamic properties of models and data. We use bootstrap algorithms to evaluate the significance of deviations between models and data, and we use(More)
Neary, and seminar participants at the LSE, Northwestern, the University of Sydney, and a MacArthur Foundation " Social interactions and economic inequality " group meeting provided helpful comments on related work. Nontechnical Summary Why does economic activity locate where it does? Knowing this informs discussion of national productivity and(More)
I present a simple two-person auction model in which a seller and a buyer make bids in terms of money; however, the value of a unit of money is uncertain. I show: (1) a monetary revaluation has purely nominal effects if and only if it is common knowledge; (2) if seller and buyer have identical beliefs, making the value of money common knowledge maximizes(More)
Acknowledgements The authors of this study are indebted to many for assistance with various aspects of the study. We list them here to acknowledge their help. In listing those who provided assistance we undoubtedly omit some who were helpful. We hope such oversights will be understood. The authors alone are responsible for errors of omission or commission(More)
Bank of Canada working papers are theoretical or empirical works-in-progress on subjects in economics and finance. The views expressed in this paper are those of the author. No responsibility for them should be attributed to the Bank of Canada. ii Acknowledgements This paper is a heavily revised Chapter 3 of my Ph.D. dissertation at the University of(More)