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This chapter investigates the impact of different state correlation assumptions for out-of-sample performance of unobserved components (UC) models with stochastic volatility. Using several measures of US inflation the author finds that allowing for correlation between inflation’s trend and cyclical (or gap) components is a useful feature to predict inflation in the short run. In contrast, orthogonality between such components improves the out-of-sample performance as the forecasting horizon widens. Accordingly, trend inflation from orthogonal trend-gap UC models closely tracks survey-based measures of long-run inflation expectations. Trend dynamics in the correlated-component case behave similarly to survey-based nowcasts. To carry out estimation, an efficient algorithm which builds upon properties of Toeplitz matrices and recent advances in precision-based samplers is provided.

Recently, star variables and the post-crisis nature of cyclical fluctuations have attracted a great deal of interest. In this chapter, the authors investigate different methods of assessing business cycles (BCs) for the European Union in general and the euro area in particular. First, the authors conduct a Monte Carlo (MC) experiment using a broad spectrum of univariate trend-cycle decomposition methods. The simulation aims to examine the ability of the analysed methods to find the observed simulated cycle with structural properties similar to actual macroeconomic data. For the simulation, the authors used the structural model’s parameters calibrated to the euro area’s real gross domestic product (GDP) and unemployment rate. The simulation outcomes indicate the sufficient composition of the suite of models (SoM) consisting of popular Hodrick–Prescott, Christiano–Fitzgerald and structural trend-cycle-seasonal filters, then used for the real application. The authors find that: (i) there is a high level of model uncertainty in comparing the estimates; (ii) growth rate (acceleration) cycles have often the worst performances, but they could be useful as early-warning predictors of turning points in growth and BCs; and (iii) the best-performing MC approaches provide a reasonable combination as the SoM. When swings last less time and/or are smaller, it is easier to pick a good alternative method to the suite to capture the BC for real GDP. Second, the authors estimate the BCs for real GDP and unemployment data varying from 1995Q1 to 2020Q4 (GDP) or 2020Q3 (unemployment), ending up with 28 cycles per country. This analysis also confirms that the BCs of euro area members are quite synchronized with the aggregate euro area. Some major differences can be found, however, especially in the case of periphery and new member states, with the latter improving in terms of coherency after the global financial crisis. The German cycles are among the cyclical movements least synchronized with the aggregate euro area.

This article provides an overview of the panel vector autoregressive models (VAR) used in macroeconomics and finance to study the dynamic relationships between heterogeneous assets, households, firms, sectors, and countries. We discuss what their distinctive features are, what they are used for, and how they can be derived from economic theory. We also describe how they are estimated and how shock identification is performed. We compare panel VAR models to other approaches used in the literature to estimate dynamic models involving heterogeneous units. Finally, we show how structural time variation can be dealt with.

Monthly 1980–2014 data are examined to determine how employment responds to money supply shocks in Canada and the United States. The focus of the analysis is a comparison of the real economies’ responses to the financial crisis and the great recession. Employment is used as a proxy for real output, though it may respond to monetary shocks with a longer lag. Vector autoregression models are specified, estimated, and interpreted. Impulse response functions are examined to assess the impact of innovations in monetary policy. A comparison of the response of employment to monetary innovations allows for evaluation of alternative business cycle theories and of the relative efficacy of Canadian v. U.S. monetary policy. Cross-border impacts are also assessed. Granger causality tests are used to examine whether money supply growth causes unemployment, whether monetary shocks cause higher or lower employment, and distinguish between short-run and long-run effects.

Achieving the elimination of racial differences in test performance, as set forth in the No Child Left Behind Act of 2001 (NCLB), requires education policies that engage the reality that African American test performances are not only about race but also about gender and residential status. In an effort to inform education policymaking with research that explores race–gender and residential inequality, I assess the growth of reading gaps in school and non-school contexts using a national and city sample of children from the Early Childhood Longitudinal, Kindergarten Cohort 1998–1999. I found that inequality in test performances was greater in the city than elsewhere, and African American boys shoulder a disproportionate educational burden related to city residency and enrollment in city schools. Additionally, children in city neighborhoods – where drugs and burglary are big problems – experience large shortfalls in reading in school and non-school contexts. I conclude with a discussion of the study’s implications for future educational policy, practice, and research, especially NCLB, which mandates that public schools achieve parity among racial groups by the end of the 2013–2014 academic year.

We analyze the determinants of the cyclical position in some Baltics and South-Eastern European countries as well as peripheral European countries over the period 2000–2013. Specifically, we consider a sample of eight economies: Croatia, Estonia, Latvia, and Lithuania for the sub-sample of Baltics and South-Eastern European economies; and Greece, Ireland, Portugal, and Spain for the sub-sample covering EMU peripheral countries. To this end, we proceed in two steps. In the first, we simulate Taylor rules for each studied countries in order to see to what extent the effective monetary policy has suffered from an expansionary bias. Such analysis is conducted for both peripheral and Central, Eastern, and South-Eastern Europe (CESE) countries. In a second step, we compare the simulated Taylor rules for our selected CESE countries with the Eurozone Taylor rule. Our contribution is threefold. First we show that the ineffectiveness of monetary policy to face imbalances – and especially financial imbalances – suggest that the EU should adopt macroprudential measures. Second, the experience of CESE and Peripheral countries suggests that fiscal policy has tended to be pro-cyclical or at least neutral. Third, we underline the importance of using the Macroeconomic Imbalance Procedure as a tool to implement automatic adjustment mechanisms.

Approximately 1,750–2,000 children die in the United States annually because of child abuse or neglect. Official statistics show that women are more often the perpetrators of abuse and neglect-related deaths, even though child welfare professionals largely attribute these deaths to men. Either acting alone or with another individual, mothers are responsible for roughly 60% of deaths and either together or alone, fathers are responsible for roughly 40% of deaths. Despite the consistency of this information, it is not widely accepted by child welfare workers – the professional group whose job it is to identify risk factors and to protect children from harm. Previous research shows that workers are more likely to believe that men are responsible for children’s deaths and that deaths are perpetrated by non-family members. In this chapter, we explore the potential explanations for workers’ misperceptions including the role of gender norms, ideology, confusion concerning how children die, and also which kinds of cases result in criminal charges and thus, shape the public’s understanding of fatal child maltreatment. Incomplete and inadequate information about the perpetration of maltreatment deaths potentially puts children at risk for future fatalities. Implications for child welfare and social service professionals, their training, and practice are discussed.