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Book part
Publication date: 19 December 2012

Nathan S. Balke

In this chapter, using a combination of long-run and sign restrictions to identify aggregate monetary and productivity factors, I find that the monetary factor is responsible for…

Abstract

In this chapter, using a combination of long-run and sign restrictions to identify aggregate monetary and productivity factors, I find that the monetary factor is responsible for long swings in nominal variables but has little effect on fluctuations in output, real wage, or labor input growth. The productivity factor in addition to increasing output growth and real wage growth in the short and long run, also results in increases in labor input and decreases in prices, but the quantitative effect of the productivity factor on labor input is relatively small. These results are robust to the number of factors included in the model and to alternative priors about the short-run effects of the monetary factor, and to the inclusion of oil prices. Oil prices, in fact, appear to be largely driven by the other aggregate factors.

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30th Anniversary Edition
Type: Book
ISBN: 978-1-78190-309-4

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Economic Modeling in the Nordic Countries
Type: Book
ISBN: 978-1-84950-859-9

Book part
Publication date: 22 November 2012

Eric R. Sims

A state space representation of a linearized DSGE model implies a VAR in terms of observable variables. The model is said be non-invertible if there exists no linear rotation of…

Abstract

A state space representation of a linearized DSGE model implies a VAR in terms of observable variables. The model is said be non-invertible if there exists no linear rotation of the VAR innovations which can recover the economic shocks. Non-invertibility arises when the observed variables fail to perfectly reveal the state variables of the model. The imperfect observation of the state drives a wedge between the VAR innovations and the deep shocks, potentially invalidating conclusions drawn from structural impulse response analysis in the VAR. The principal contribution of this chapter is to show that non-invertibility should not be thought of as an “either/or” proposition – even when a model has a non-invertibility, the wedge between VAR innovations and economic shocks may be small, and structural VARs may nonetheless perform reliably. As an increasingly popular example, so-called “news shocks” generate foresight about changes in future fundamentals – such as productivity, taxes, or government spending – and lead to an unassailable missing state variable problem and hence non-invertible VAR representations. Simulation evidence from a medium scale DSGE model augmented with news shocks about future productivity reveals that structural VAR methods often perform well in practice, in spite of a known non-invertibility. Impulse responses obtained from VARs closely correspond to the theoretical responses from the model, and the estimated VAR responses are successful in discriminating between alternative, nested specifications of the underlying DSGE model. Since the non-invertibility problem is, at its core, one of missing information, conditioning on more information, for example through factor augmented VARs, is shown to either ameliorate or eliminate invertibility problems altogether.

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DSGE Models in Macroeconomics: Estimation, Evaluation, and New Developments
Type: Book
ISBN: 978-1-78190-305-6

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Change and Continuity Management in the Public Sector: The DALI Model for Effective Decision-Making
Type: Book
ISBN: 978-1-78973-168-2

Book part
Publication date: 16 September 2022

Luca Gambetti, Christoph Görtz, Dimitris Korobilis, John D. Tsoukalas and Francesco Zanetti

A vector autoregression model estimated on US data before and after 1980 documents systematic differences in the response of short- and long-term interest rates, corporate bond

Abstract

A vector autoregression model estimated on US data before and after 1980 documents systematic differences in the response of short- and long-term interest rates, corporate bond spreads and durable spending to news total factor productivity shocks. Interest rates across the maturity spectrum broadly increase in the pre-1980s and broadly decline in the post-1980s. Corporate bond spreads decline significantly, and durable spending rises significantly in the post-1980 period while the opposite short-run response is observed in the pre-1980 period. Measuring expectations of future monetary policy rates conditional on a news shock suggests that the Federal Reserve has adopted a restrictive stance before the 1980s with the goal of retaining control over inflation while adopting a neutral/accommodative stance in the post-1980 period.

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Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

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Change and Continuity Management in the Public Sector: The DALI Model for Effective Decision-Making
Type: Book
ISBN: 978-1-78973-168-2

Abstract

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Change and Continuity Management in the Public Sector: The DALI Model for Effective Decision-Making
Type: Book
ISBN: 978-1-78973-168-2

Book part
Publication date: 13 December 2013

Kirstin Hubrich and Timo Teräsvirta

This survey focuses on two families of nonlinear vector time series models, the family of vector threshold regression (VTR) models and that of vector smooth transition regression…

Abstract

This survey focuses on two families of nonlinear vector time series models, the family of vector threshold regression (VTR) models and that of vector smooth transition regression (VSTR) models. These two model classes contain incomplete models in the sense that strongly exogeneous variables are allowed in the equations. The emphasis is on stationary models, but the considerations also include nonstationary VTR and VSTR models with cointegrated variables. Model specification, estimation and evaluation is considered, and the use of the models illustrated by macroeconomic examples from the literature.

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VAR Models in Macroeconomics – New Developments and Applications: Essays in Honor of Christopher A. Sims
Type: Book
ISBN: 978-1-78190-752-8

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Book part
Publication date: 10 August 2010

Gordon Burt

The subject matter of psychology can be illustrated by addressing the questions, ‘who am I?’, ‘what do I spend my time doing?’ and ‘reflecting on my life, where have I come from…

Abstract

The subject matter of psychology can be illustrated by addressing the questions, ‘who am I?’, ‘what do I spend my time doing?’ and ‘reflecting on my life, where have I come from and where am I going?’. I am a human being and also more generally an animal. I am a biological entity and also a psychological entity. I have an identity and a personality. I am an individual and also a member of a social system. I am similar to other human beings but also different. In some respects I am normal and in other respects abnormal.

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Conflict, Complexity and Mathematical Social Science
Type: Book
ISBN: 978-1-84950-973-2

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