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    <title>EconStor Community: Bonn Graduate School of Economics (BGSE), Universität Bonn</title>
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      <title>On the solution of Markov-switching rational expectations models</title>
      <link>http://hdl.handle.net/10419/71901</link>
      <description>Title: On the solution of Markov-switching rational expectations models
&lt;br/&gt;
&lt;br/&gt;Authors: Carravetta, Francesco; Sorge, Marco M.
&lt;br/&gt;
&lt;br/&gt;Abstract: This paper describes a method for solving a class of forward-looking Markov-switching Rational Expectations models under noisy measurement, by specifying the unobservable expectations component as a general-measurable function of the observable states of the system, to be determined optimally via stochastic control and filtering theory. Solution existence is proved by setting this function to the regime-dependent feedback control minimizing the mean-square deviation of the equilibrium path from the corresponding perfect-foresight autoregressive Markov jump state motion. As the exact expression of the conditional (rational) expectations term is derived both in finite and infinite horizon model formulations, no (asymptotic) stationarity assumptions are needed to solve forward the system, for only initial values knowledge is required. A simple sufficient condition for the mean-square stability of the obtained rational expectations equilibrium is also provided.</description>
      <pubDate>Fri, 29 Oct 2010 22:58:59 GMT</pubDate>
    </item>
    <item>
      <title>Signaling in first-price auctions</title>
      <link>http://hdl.handle.net/10419/71900</link>
      <description>Title: Signaling in first-price auctions
&lt;br/&gt;
&lt;br/&gt;Authors: Rieck, Thomas
&lt;br/&gt;
&lt;br/&gt;Abstract: It is commonly assumed in private value auctions that bidders have no information about the realization of the other bidders' valuations. Nevertheless, an informative public signal about the realization may be released by a bidder while he learns his own valuation. Using a simple discrete asymmetric first-price auction setting, we show that a bidder may indeed benefit from the presence of an informative signal about his own valuation. We characterize the optimal signal and show that a signal is not beneficial if it is too precise. The latter result carries over to a general continuous asymmetric first-price auction model. Finally, we use a specific signaling structure with uniform distributions to show that signaling need not be beneficial for any precision of the signal.</description>
      <pubDate>Thu, 29 Oct 2009 22:58:59 GMT</pubDate>
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    <item>
      <title>Panel data models with unobserved multiple time-varying effects to estimate risk premium of corporate bonds</title>
      <link>http://hdl.handle.net/10419/71899</link>
      <description>Title: Panel data models with unobserved multiple time-varying effects to estimate risk premium of corporate bonds
&lt;br/&gt;
&lt;br/&gt;Authors: Bada, Oualid; Kneip, Alois
&lt;br/&gt;
&lt;br/&gt;Abstract: We use a panel cointegration model with multiple time- varying individual effects to control for the enigmatic missing factors in the credit spread puzzle. Our model specification enables as to capture the unobserved dynamics of the systematic risk premia in the bond market. In order to estimate the dimensionality of the hidden risk factors jointly with the model parameters, we rely on a modified version of the iterated least squares method proposed by Bai, Kao, and Ng (2009). Our result confirms the presence of four common risk components affecting the U.S. corporate bonds during the period between September 2006 and March 2008. However, one single risk factor is sufficient to describe the data for all time periods prior to mid July 2007 when the subprime crisis was detected in the financial market. The dimensionality of the unobserved risk components therefore seems to reflect the degree of difficulty to diversify the individual bond risks.</description>
      <pubDate>Thu, 29 Oct 2009 22:58:59 GMT</pubDate>
    </item>
    <item>
      <title>Exploring the causes of frictional wage dispersion</title>
      <link>http://hdl.handle.net/10419/71898</link>
      <description>Title: Exploring the causes of frictional wage dispersion
&lt;br/&gt;
&lt;br/&gt;Authors: Tjaden, Volker; Wellschmied, Felix
&lt;br/&gt;
&lt;br/&gt;Abstract: Standard search models are inconsistent with the amount of frictional wage dispersion found in U.S. data. We resolve this apparent puzzle by modeling skill development (learning by doing on the job, skill loss during unemployment) and duration dependence in unemployment benefits in a random on the job search model featuring two-sided heterogeneity. The model's key parameters are calibrated using micro data on employment mobility and wages from the Survey of Income and Program Participation (SIPP). Our model is consistent with the amount of frictional wage dispersion found in the data. Skill development on the job is the most important driver behind this result. Meanwhile, firm heterogeneity never accounts for more than 20% of overall wage inequality within an age cohort.</description>
      <pubDate>Fri, 29 Oct 2010 22:58:59 GMT</pubDate>
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