Agents are hit by heterogeneous productivity shocks, they observe their own productivity and a noisy public signal regarding aggregate productivity.
The public signal gives rise Abstract - Cited by 7 self - Add to MetaCart This paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity. Numerical results suggest that the model can generate sizeable amounts of noise-driven volatility in the short run.
Email: glorenzo mit. A previous version of this paper circulated under the title:. Modest Policy Interventions by Eric M. Leeper, Tao Zha , We present a framework for computing and evaluating linear projections of macro variables conditional on hypothetical paths of monetary policy. Abstract - Cited by 23 self - Add to MetaCart We present a framework for computing and evaluating linear projections of macro variables conditional on hypothetical paths of monetary policy. The framework is applied to an econometric model of U.
It finds that a rich class of interventions routinely considered by the Federal Reserve are modest and their impacts can be reliably forecasted by an accurately identified linear model. Moreover, modest interventions can matter: they may shift the projected paths and probability distributions of macro variables in economically meaningful ways.
This paper investigates the economic effects of conflict, using the terrorist conflict in the Basque Country as a case study. Our analysis rests on two different strategies. Abstract - Cited by 51 0 self - Add to MetaCart This paper investigates the economic effects of conflict, using the terrorist conflict in the Basque Country as a case study.
We find that, after the outbreak of terrorism, per capita GDP in the Basque Country declined about 10 percent points relative to the synthetic control region. Moreover, this gap seemed to widen in response to spikes in terrorist activity. The second part of this study uses the truce declared in September as a natural experiment to estimate the effects of the conflict.
If the terrorist conflict was perceived to have a negative impact on the Basque economy, stocks of firms with a significant part of their business in the Basque Country should have shown a positive relative performance as the truce became credible, and a negative relative performance at the end of the cease-fire.
We find evidence that is consistent with this conjecture using event study methods. This paper develops Bayesian methods for computing such distributions or bands.
It broadens the class of conditional foreca Abstract - Cited by 49 1 self - Add to MetaCart : In the existing literature, conditional forecasts in the vector autoregressive VAR framework have not been commonly presented with probability distributions or error bands. It broadens the class of conditional forecasts to which the methods can be applied. The methods work for both structural and reduced-form VAR models and, in contrast to common practices, account for the parameter uncertainty in small samples.
Empirical examples under the flat prior and under the reference prior of Sims and Zha are provided to show the use of these methods. Introduction In policy analysis, it is believed that monetary policy has long and variable effects on the overall economy. To capture such Swanson, John C. Williams , According to many macroeconomic models, this should have greatly reduced the effectiveness of monetary policy and increased the efficacy of fiscal policy.
However, standard macroeconomic theory also implies that private-sector decisions depend on the entire path of expected future short-term interest rates, not just the current level of the overnight rate. Thus, interest rates with a year or more to maturity are arguably more relevant for the economy, and it is unclear to what extent the zero bound has constrained those yields.
In this paper, we propose a novel approach to measure the effects of the zero lower bound on interest rates of any maturity. We compare the sensitivity of interest rates of various maturities to macroeconomic news during periods when short-term interest rates were very low to that during normal times. We find that yields on Treasury securities with a year or more to maturity were surprisingly responsive to news throughout —10, suggesting that monetary and fiscal policy were likely to have been about as effective as usual during this period.
Abstract We show how correctly to extend known methods for generating error bands in reduced form VAR's to overidentified models. Keywords Bayesian methods Confidence region Impulse responses Vector autoregression. Access to Document Link to publication in Scopus. Link to the citations in Scopus. Fingerprint Dive into the research topics of 'Error bands for impulse responses'.
Together they form a unique fingerprint. View full fingerprint. Econometrica , 67 5 , Sims, Christopher A. In: Econometrica. In: Econometrica , Vol.
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