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A Multiple Break Panel Approach to Estimating United States Phillips Curves
Get PDFPhillips curves are often estimated without due attention being paid to the underlying time series properties of the data. In particular, the consequences of inflation having discrete breaks in mean have not been studied adequately. We show by means of simulations and a detailed empirical example based on United States data that not taking account of breaks may lead to biased, and therefore spurious, estimates of Phillips curves. We suggest a method to account for the breaks in mean inflation and obtain meaningful and unbiased estimates of the short- and long-run Phillips curves in the United States
Notes on Agents’ Behavioral Rules Under Adaptive Learning and Studies of Monetary Policy
Get PDFThese notes try to clarify some discussions on the formulation of individual
intertemporal behavior under adaptive learning in representative agent models.
First, we discuss two suggested approaches and related issues in the context of a
simple consumption-saving model. Second, we show that the analysis of learning in the NewKeynesian monetary policy model based on “Euler equations” provides a consistent and valid approach
On decomposing the causes of changes in income-related health inequality with longitudinal data
Get PDFRegression-based decomposition procedures are used to both standardise the
concentration index and to determine the contribution of inequalities in the individual health determinants to the overall value of the index. The main contribution of this paper
is to develop analogous procedures to decompose the income-related health mobility and health-related income mobility indices first proposed in Allanson, Gerdtham and Petrie (2010) and subsequently extended in Petrie, Allanson and Gerdtham (2010) to account for deaths. The application of the procedures is illustrated by an empirical study that uses British Household Panel Survey (BHPS) data to analyse the performance of Scotland in
tackling income-related health inequalities relative to England & Wales over the five year period 1999 to 2004
Life-Cycle, Effort and Academic Inactivity
Get PDFIt has been observed that university professors sometimes become less research active in their later years. This paper models the decision to become inactive as a utility maximising problem under conditions of uncertainty and derives an age-dependent activity condition for the level of research productivity. The model implies that professors who are close to retirement age are more likely to become inactive when faced with setbacks in their research
while those who continue research do not lower their activity levels. Using data from the University of Iceland, we find support for the model’s predictions. The model suggests that universities should induce their older faculty to remain research active by striving to make their research more productive and enjoyable, maintaining peer pressure, reducing job security and offering higher performance related pay
Dark Clouds or Silver Linings? Knightian Uncertainty and Climate Change
Get PDFThis paper examines the impact of Knightian uncertainty upon optimal climate policy
through the prism of a continuous-time real option modelling framework. We analytically
determine optimal intertemporal climate policies under ambiguous assessments of climate
damages. Additionally, numerical simulations are provided to illustrate the properties
of the model. The results indicate that increasing Knightian uncertainty accelerates climate policy, i.e. policy makers become more reluctant to postpone the timing of climate policies into the future
Hierarchical Shrinkage in Time-Varying Parameter Models
Get PDFIn this paper, we forecast EU-area inflation with many predictors using time-varying parameter models. The facts that time-varying parameter models are parameter-rich and the time span of our data is relatively short motivate a desire for shrinkage. In constant coefficient regression models, the Bayesian Lasso is gaining increasing popularity as an effective tool for achieving such shrinkage. In this paper, we develop econometric methods for using the Bayesian Lasso with time-varying parameter models. Our approach allows for the coefficient on each predictor to be: i) time varying, ii) constant over time or iii) shrunk to zero. The econometric methodology decides automatically which category each coefficient belongs in. Our empirical results indicate the benefits of such an approach
Institutions, Property Rights, and Economic Development in Historical Perspective
Get PDFInstitutions, and more speci cally private property rights, have come to be seen as a major determinant of long-run economic development. We evaluate the case for property rights as an explanatory factor
of the Industrial Revolution and derive some lessons for the analysis of developing countries today. We pay particular attention to the role of property rights in the accumulation of physical capital and the production of new ideas. The evidence that we review from the economic history literature does not support the institutional thesis
The Fair Trade movement: an economic perspective
Get PDFFair Trade (FT) products such as coffee and textiles are becoming increasingly
popular with altruistic consumers all over the world. This paper seeks to understand the economic effects of this grassroots movement which directly links ethically-minded consumers in industrialised countries with marginalised producers in developing economies. We extend the Ricardian trade model and introduce a FT sector in developing South that offers a fair wage – the FT premium. There are indeed positive welfare effects from FT but those come
at the expense of rising inequalities within South which are in turn a rational
by-product of FT. The degree of inequalities depends on the specifics of the
cooperative structures in the FT sector. Given the rigidities and inequalities
FT introduces and rests upon, this form of alternative trade appears to be
only sustainable as niche movement
UK Macroeconomic Forecasting with Many Predictors: Which Models Forecast Best and When Do They Do So?
Get PDFBlock factor methods offer an attractive approach to forecasting with many predictors. These extract the information in these predictors into factors reflecting different blocks of variables (e.g. a price block, a housing block, a financial block, etc.). However, a forecasting model which simply includes all blocks as predictors risks being over-parameterized. Thus, it is desirable to use a methodology which allows
for different parsimonious forecasting models to hold at different points in time. In this paper, we use dynamic model averaging and dynamic model selection to achieve this goal. These methods automatically alter the weights attached to different forecasting model as evidence comes in about which has forecast
well in the recent past. In an empirical study involving forecasting output and inflation using 139 UK monthly time series variables, we find that the set of predictors changes substantially over time.
Furthermore, our results show that dynamic model averaging and model selection can greatly improve forecast performance relative to traditional forecasting methods
Regime-Switching Cointegration
Get PDFWe develop methods for Bayesian inference in vector error correction models
which are subject to a variety of switches in regime (e.g. Markov switches in
regime or structural breaks). An important aspect of our approach is that we
allow both the cointegrating vectors and the number of cointegrating relationships
to change when the regime changes. We show how Bayesian model averaging
or model selection methods can be used to deal with the high-dimensional
model space that results. Our methods are used in an empirical study of the
Fisher e ffect