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Record ID
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157
[ Page 53 of 68, No. 1 ]
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Date
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2006-10 |
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Author
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George Alogoskoufis and Ron Smith
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Affiliation
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University of London and |
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Title
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On Error Correction Models: Specification, Interpretation, Estimation |
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Summary /
Abstract
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Error Correction Models (ECMs) have proved a popular organizing principle in applied econometrics, despite the lack of consensus as to exactly what constitutes their defining characteristic, and the rather limited role that has been given to economic theory by their proponents. This paper uses a historical survey of the evolution of ECMs to explain the alternative specifications and interpretations and proceeds to examine their implications for estimation. The various approaches are illustrated for wage equations by application to UK labour market data 1855-1987. We demonstrate that error correction models impose strong and testable non-linear restrictions on dynamic econometric equations, and that they do not obviate the need for modelling the process of expectations formation. With the exception of a few special cases, both the non-linear restrictions and the modelling of expectations have been ignored by those who have treated ECMs as merely re-parameterisations of dynamic linear regression models or vector autoregressions. |
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Keywords
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Error correction models; wage equations |
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URL
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http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6419.1991.tb00128.x/pdf
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Record ID
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156
[ Page 53 of 68, No. 2 ]
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Date
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2006-10 |
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Author
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Juan Dolado, Tim Jenkinson, and Simon Sosvilla-Rivero
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Affiliation
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Bank of Spain, University of Oxford, and University of Birmingham |
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Title
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Cointegration and Unit Roots |
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Summary /
Abstract
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This paper provides an updated survey of a burgeoning literature on testing, estimation and model specification in the presence of integrated variables. Integrated variables are a specific class of non-stationary variables which seem to characterize faithfully the properties of many macroeconomic time series. The analysis of co-integration develops out of the existence of unit roots and offers a generic route to test the validity of the equilibrium predictions of economic theories. Special emphasis is put on the empirical researcher’s point of view. |
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Keywords
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Unit root, co-integration, trends, error correction mechanisms |
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URL
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http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6419.1990.tb00088.x/pdf
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Record ID
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155
[ Page 53 of 68, No. 3 ]
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Date
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2006-10 |
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Author
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Adrian Pagan
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Affiliation
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University of Rochester |
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Title
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Three Econometric Methodologies: A Critical Appraisal |
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Summary /
Abstract
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Three econometric methodologies, associated respectively with David Hendry, Christopher Sims and Edward Leamer have been advocated and practiced by their adherents in recent years. A number of good papers have appeared about each methodology, but little has been written in a comparative vein. This paper is concerned with that task. It provides a statement of the main steps to be followed in using each of the methodologies and comments upon the strengths and weaknesses of each approach. An attempt is made to contrast and compare the techniques used, the information provided, and the questions addressed by each of the methodologies. It is hoped that such a comparison will aid researchers in choosing the best way to examine their particular problem. |
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Keywords
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Econometric methodologies; Hendry; Sims; Learner; extreme bounds analysis; vector autoregressions; dynamic specification |
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URL
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http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6419.1987.tb00022.x/pdf
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Record ID
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154
[ Page 53 of 68, No. 4 ]
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Date
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2011-05 |
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Author
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Jordi Galí, Frank Smets, and Rafael Wouters
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Affiliation
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National Bureau of Economic Research |
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Title
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Unemployment in an Estimated New Keynesian Model |
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Summary /
Abstract
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We reformulate the Smets-Wouters (2007) framework by embedding the theory of unemployment proposed in Galí (2011a,b). We estimate the resulting model using postwar U.S. data, while treating the unemployment rate as an additional observable variable. Our approach overcomes the lack of identification of wage markup and labor supply shocks highlighted by Chari, Kehoe and McGrattan (2008) in their criticism of New Keynesian models, and allows us to estimate a "correct" measure of the output gap. In addition, the estimated model can be used to analyze the sources of unemployment fluctuations. |
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URL
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http://d.repec.org/n?u=RePEc:nbr:nberwo:17084&r=mac
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Record ID
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153
[ Page 53 of 68, No. 5 ]
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Date
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2011-05 |
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Author
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Andrés González, Lavan Mahadeva, Juan D. Prada and Diego Rodríguez
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Affiliation
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Banco de la República, Colombia, Bank of England, Northwestern University, and Banco de la República, Colombia |
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Title
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Policy Analysis Tool Applied to Colombian Needs: PATACON Model Description |
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Summary /
Abstract
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In this document we lay out the microeconomic foundations of a dynamic stochastic general equilibrium model designed to forecast and to advice monetary policy authorities in Colombia. The model is called Policy Analysis Tool Applied to Colombian Needs (PATACON). In companion documents we present other aspects of the model and its platform, including the estimation of the parameters that affect the dynamics and the impulse responses functions. |
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Keywords
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Monetary Policy, DSGE, Small open economy |
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URL
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http://d.repec.org/n?u=RePEc:col:000094:008698&r=mon
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Record ID
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152
[ Page 53 of 68, No. 6 ]
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Date
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2011-05 |
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Author
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Berganza, Juan Carlos and Broto, Carmen
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Affiliation
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Bank of Finland |
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Title
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Flexible inflation targets, forex interventions and exchange rate volatility in emerging countries |
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Summary /
Abstract
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Emerging economies with inflation targets (IT) face a dilemma between fulflling the theoretical conditions of "strict IT", which implies a fully flexible exchange rate, or applying a "flexible IT", which entails a de facto managed floating exchange rate with forex interventions to moderate exchange rate volatility. Using a panel data model for 37 countries we find that, although IT lead to higher exchange rate instability than alternative regimes, forex interventions in some IT countries have been more effective in reducing volatility than in non-IT countries, which may justify the use of "flexible IT" by policymakers. |
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Keywords
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Inflation targeting; exchange rate volatility; foreign exchange interventions; emerging economies |
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URL
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http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/DP0911.pdf
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Record ID
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151
[ Page 53 of 68, No. 7 ]
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Date
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2011-05 |
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Author
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E. Gasteiger
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Affiliation
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University of Vienna |
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Title
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Heterogeneous Expectations, Taylor Rules and the Merit of Monetary Policy Inertia |
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Summary /
Abstract
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We present new results for the performance of Taylor rules in a New Keynesian model with heterogeneous expectations. Agents have either rational or adaptive expectations. We find that depending on the particular rule, expectational heterogeneity can create or increase the set of policies that leads to local explosiveness. This is a new level of destabilization compared to what is known. In addition, we demonstrate that policy inertia is an e ffective tool to safeguard the economy against local explosiveness. Thus, we provide a rationalization for central banks to adjust interest rates with notable inertia in response to shocks. |
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Keywords
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Monetary Policy, Taylor Rules, Heterogeneous Expectations |
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URL
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http://mpra.ub.uni-muenchen.de/31004/1/MPRA_paper_31004.pdf
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Record ID
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149
[ Page 53 of 68, No. 9 ]
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Date
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2010-05 |
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Author
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Luis Catão and Adrian Pagan
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Affiliation
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IADB, IMF and University of Technology, Sydney
and Queensland University of Technology |
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Title
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The Credit Channel and Monetary Transmission in Brazil and Chile: A Structural VAR Approach |
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Summary /
Abstract
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We use an expectation-augmented SVAR representation of an open economy New Keynesian model to study monetary transmission in Brazil and Chile. The underlying structural model incorporates key structural features of Emerging Market economies, notably the role of a bank-credit channel. We find that interest rate changes have swifter effects on output and inflation in both countries compared to advanced economies and that exchange rate dynamics plays an important role in monetary transmission, as currency movements are highly responsive to changes in policy-controlled interest rates. We also find the typical size of credit shocks to have large effects on output and inflation in the two economies, being stronger in Chile where bank penetration is higher. |
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Keywords
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Credit channel, SVAR, DSGE, EMEs |
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URL
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http://d.repec.org/n?u=RePEc:chb:bcchwp:579&r=ban
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Record ID
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148
[ Page 53 of 68, No. 10 ]
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Date
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2011-05 |
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Author
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Laurence Ball and Sandeep Mazumder
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Affiliation
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Johns Hopkins University and Wake Forest University |
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Title
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Inflation Dynamics and the Great Recession |
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Summary /
Abstract
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This paper examines inflation dynamics in the Unites States since 1960, with a particular focus on the Great Recession. A puzzle emerges when Phillips curves estimated over 1960- 2007 are used to predict inflation over 2008-2010: inflation should have fallen by more than it did. We resolve this puzzle with two modifications of the Phillips curve, both suggested by theories of costly price adjustment: we measure core inflation with the median CPI inflation rate, and we allow the slope of the Phillips curve to change with the level and variance of inflation. We then examine the hypothesis of anchored inflation expectations. We find that expectations have been fully "shock-anchored" since the 1980s, while "level anchoring" has been gradual and partial, but significant. It is not clear whether expectations are sufficiently anchored to prevent deflation over the next few years. Finally, we show that the Great Recession provides fresh evidence against the New Keynesian Phillips curve with rational expectations. |
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Keywords
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Inflation; Phillips curve; Great Recession. |
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URL
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http://d.repec.org/n?u=RePEc:jhu:papers:580&r=mon
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