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199
Has the U.S. Economy Become More Stable? A Bayesian Approach Based on a MarkovSwitching Model of Business Cycle
, 1999
"... We hope to be able to provide answers to the following questions: 1) Has there been a structural break in postwar U.S. real GDP growth toward more stabilization? 2) If so, when would it have been? 3) What's the nature of the structural break? For this purpose, we employ a Bayesian approach to d ..."
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Cited by 381 (15 self)
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We hope to be able to provide answers to the following questions: 1) Has there been a structural break in postwar U.S. real GDP growth toward more stabilization? 2) If so, when would it have been? 3) What's the nature of the structural break? For this purpose, we employ a Bayesian approach to dealing with structural break at an unknown changepoint in a Markovswitching model of business cycle. Empirical results suggest that there has been a structural break in U.S. real GDP growth toward more stabilization, with the posterior mode of the break date around 1984:1. Furthermore, we #nd a narrowing gap between growth rates during recessions and booms is at least as important as a decline in the volatility of shocks. Key Words: Bayes Factor, Gibbs sampling, Marginal Likelihood, MarkovSwitching, Stabilization, Structural Break. JEL Classi#cations: C11, C12, C22, E32. 1. Introduction In the literature, the issue of postwar stabilization of the U.S. economy relative to the prewar period has...
Continuous Record Asymptotics for Rolling Sample Variance Estimators
 Econometrica
, 1996
"... It is widely known that conditional covariances of asset returns change over time. ..."
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Cited by 117 (0 self)
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It is widely known that conditional covariances of asset returns change over time.
Rare Disasters, Asset Prices and Welfare Costs. American Economic Review, forthcoming
, 2009
"... A representativeconsumer model with EpsteinZinWeil preferences and i.i.d. shocks, including rare disasters, accords with observed equity premia and riskfree rates if the coefficient of relative risk aversion equals 3–4. If the intertemporal elasticity of substitution exceeds one, an increase in ..."
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Cited by 70 (0 self)
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A representativeconsumer model with EpsteinZinWeil preferences and i.i.d. shocks, including rare disasters, accords with observed equity premia and riskfree rates if the coefficient of relative risk aversion equals 3–4. If the intertemporal elasticity of substitution exceeds one, an increase in uncertainty lowers the pricedividend ratio for equity, and a rise in the expected growth rate raises this ratio. Calibrations indicate that society would willingly reduce GDP by around 20 percent each year to eliminate rare disasters. The welfare cost from usual economic fluctuations is much smaller, though still important, corresponding to lowering GDP by about 1.5 percent each year. (JEL E13, E21, E22, E32) In a previous study, Barro (2006), I used the Thomas A. Rietz (1988) idea of rare economic disasters to explain the equity premium and related assetpricing puzzles. My quantitative examination of large macroeconomic contractions in 35 countries during the twentieth century suggested a disaster probability of roughly 2 percent per year. The size distribution of GDP contractions during these events ranged between 15 percent (the arbitrary lower bound) and over 60
The dynamics of emerging market equity flows
 Journal of International Money and Finance
, 2002
"... ..."
Testing for the Cointegrating Rank of a VAR Process with a Time Trend
 DISCUSSION PAPER 51, SFB 373, HUMBOLDTUNIVERSITAT ZU
, 1997
"... Standard tests for the cointegrating rank of a vector autoregressive (VAR) process have nonstandard limiting distributions which depend on the characteristics of intercept terms and time trends in the system. In practice these characteristics are often unknown. Therefore modified tests are proposed ..."
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Cited by 56 (5 self)
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Standard tests for the cointegrating rank of a vector autoregressive (VAR) process have nonstandard limiting distributions which depend on the characteristics of intercept terms and time trends in the system. In practice these characteristics are often unknown. Therefore modified tests are proposed with limiting distributions which do not depend on the characteristics of deterministic terms under the null hypothesis. One type of tests makes use of lag augmentation, that is, a VAR process of order p + 1 is fitted when the true order is p while the tests are based on the coefficient matrices of the first p lags only. It is shown that Ø 2 limiting distributions are obtained in this way. The price for this simplicity will be reduced power, however. Therefore, we also consider LM (Lagrange multiplier) type tests. These tests are shown to have nonstandard limiting distributions which do not depend on deterministic terms and have better local power than competing LR (likelihood ratio) test...
Dealing with Structural Breaks
 IN PALGRAVE HANDBOOK OF ECONOMETRICS
, 2006
"... This chapter is concerned with methodological issues related to estimation, testing and computation in the context of structural changes in the linear models. A central theme of the review is the interplay between structural change and unit root and on methods to distinguish between the two. The top ..."
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Cited by 44 (8 self)
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This chapter is concerned with methodological issues related to estimation, testing and computation in the context of structural changes in the linear models. A central theme of the review is the interplay between structural change and unit root and on methods to distinguish between the two. The topics covered are: methods related to estimation and inference about break dates for single equations with or without restrictions, with extensions to multiequations systems where allowance is also made for changes in the variability of the shocks; tests for structural changes including tests for a single or multiple changes and tests valid with unit root or trending regressors, and tests for changes in the trend function of a series that can be integrated or trendstationary; testing for a unit root versus trendstationarity in the presence of structural changes in the trend function; testing for cointegration in the presence of structural changes; and issues related to long memory and level shifts. Our focus is on the conceptual issues about the frameworks adopted and the assumptions imposed as they relate to potential applicability. We also highlight the potential problems that can occur with methods that are commonly used and recent work that has been done to overcome them.
How do banks set interest rates
 European Economic Review
, 2008
"... This research was done during a period as a visiting scholar at the NBER. The views expressed herein are ..."
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Cited by 43 (10 self)
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This research was done during a period as a visiting scholar at the NBER. The views expressed herein are
Modelling structural breaks, long memory and stock market volatility: an overview
 Journal of Econometrics
"... Modelling structural breaks, long memory and stock market volatility: an overview ..."
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Cited by 39 (2 self)
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Modelling structural breaks, long memory and stock market volatility: an overview