1,721,083 research outputs found
The international dimension of trend inflation
No full textA trend-cycle BVAR decomposition investigates the role of different slow-moving trends – i.e., globalization, expectations, automation, labor demand and supply – in shaping the slow-moving dynamics of trend inflation. Despite well-anchored expectations, slow-moving imported “cost-push” factors induced disinflationary pressure keeping trend inflation below target. The cycle block provides evidence of inflation volatility increasingly driven by international factors. These results can explain why, from 2000 in the U.S. and before the recent surge, inflation remained both below target and silent to domestic slack
Forecasting inflation: a comparison of linear Phillips curve models and nonlinear time series models
No full textThe aim of this paper is to analyze the forecasting performance of
alternative model for the US inflation rate over the period 1950.1-2002.7.
NAIRU Phillips curve models forecasts are contrasted with those obtained by a
special class of nonlinear time series models, the threshold autoregressive
models. The forecast evaluation is conducted on point and density forecasts.
The results show that overall the non linear specification are better able to
capture the distributional features of the series, although in terms of MSFE the
Phillips curve specification can yield noticeable forecasting gains for medium
and long term horizons. Previous finding on the forecasting superiority of the
simple naïve model are confuted.
JEL classifications: C22, C53, E3
Non-Linearities, State-Dependent Prices and the Transmission Mechanism of Monetary Policy
No full textFat-Tail Distributions and Business-Cycle Models. WP Series University of Verona Department of Economics (ISSN 2036-2919), 02/2012
No full textRecent empirical findings suggest that macroeconomic variables are seldom normally distributed. For example, the distributions of aggregate output growth-rate time series of many OECD countries are well approximated by symmetric exponential-power (EP) densities, with Laplace fat tails. In this work, we assess whether Real Business Cycle (RBC) and standard medium-scale New-Keynesian (NK) models are able to replicate this statistical regularity. We simulate both models drawing Gaussian- vs Laplace-distributed shocks and we explore the statistical properties of simulated time series. Our results cast doubts on whether RBC and NK models are able to provide a satisfactory representation of the transmission mechanisms linking exogenous shocks to macroeconomic dynamics
Walk on the wild side: Temporarily unstable paths and multiplicative sunspots
Get PDFWe propose a generalization of the rational expectations framework to allow for temporarily unstable paths. Our approach introduces multiplicative sunspot shocks and it yields drifting parameters and stochastic volatility. Then, we provide an econometric strategy to estimate this generalized model on the data. The methodology allows the data to choose between different possible alternatives: determinacy, indeterminacy, and temporary instability. We apply our methodology to US in?ation dynamics in the 1970s through the lens of a simple New Keynesian model. When temporarily unstable paths are allowed, the data unambiguously select them to explain the stag?ation period in the 1970s
The unbearable lightness of equilibria in a low interest rate environment
Get PDFStructural models with no solution are incoherent, and those with multiple solutions are incomplete. We show that models with occasionally binding constraints are not generically coherent. Coherency requires restrictions on the parameters or on the support of the distribution of the shocks. In presence of multiple shocks, the support restrictions cannot be independent from each other, so the assumption of orthogonality of structural shocks is incompatible with coherency. Models whose coherency is based on support restrictions are generically incomplete, admitting a very large number of minimum state variable solutions
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