1,847,119 research outputs found
Long-run strong-exogeneity
Full text linkThis note supplements the paper by Pradel and Rault (2003) "Exogeneity in VAR-ECM models with purely exogenous long-run paths", Oxford Bulletin of Economics and Statistics. In particuliar, we propose a condition to distinguish between cointegration amongst "endogenous" and "exogenous" variables and also between cointegrating vectors appearing in the equations of the "endogenous" and "exogenous" variables, i.e in the conditional and marginal models. This condition that we call "long-run strong-exogeneity" has a practical appealing aspect since it permits valid long-run forecasts from the conditional model alone.cointegration, exogeneity, weak exogeneity
Long Run Neutrality of Money in Mexico
Full text linkThe Fisher-Seater (FS) methodology is used to investigate long run money neutrality with respect to real GDP and real output in ten selected industries in Mexico. Size distortions and low power of the FS test, issues first raised by Coe and Nason (2003, 2004), are addressed using the Coe-Nason bootstrapping procedure. The evidence indicates that long run money neutrality can be rejected for real GDP and for up to five of the ten industrial sectors studied. These findings indicate that the effects of monetary policy are likely to differ across sectors even in the long run.money neutrality, Fisher-Seater Test, bootstrapping.
Long-run inflation expectations
No full textPublished online: 07 March 2025Professional forecasters’ long-run inflation expectations overreact to news and exhibit persistent, predictable biases in forecast errors. A model incorporating overconfidence in private information and a persistent expectations bias—which generates persistent forecast errors across most forecasters—accounts for these two features of the data, offering a valuable tool for studying long-run inflation expectations. Our analysis highlights substantial, time- varying heterogeneity in forecasters’ responses to public information, with sensitivity declining across all forecasters when monetary policy is constrained by the effective lower bound. The model provides a framework to evaluate whether policymakers’ communicated inflation paths are consistent with anchored long-run expectations
Introduction: Demand, Complexity, and Long-Run Economic Evolution
No full textOver the past two centuries, the unprecedented expansion of consumer spending across advanced economies has been an essential driver of long run-economic growth, innovation, and prosperity. So essential in fact, that increases in consumer purchasing power are also frequently mentioned as a main reason for why long-run economic growth is inherently desirable: more growth offers consumers greater opportunity to better satisfy their needs and wants. At the same time, the underlying problems that consumers seek to satisfy are also fundamentally changing: as the overall share of spending dedicated to the satisfaction of basic needs has declined, more spending is inevitably dedicated to complex activities and domains in which consumers can exercise a higher degree of discretionary power. In these new domains, the information and social environment play a much greater role in shaping the orientation of consumer spending. These long run trends raise new questions, such as: Will levels of consumer spending continue to grow as they have recently? Can we expect consumer welfare to benefit from future consumption growth the same way that it has in the past? This considers the long-run evolution of consumption patterns alongside the social, behavioural, and technological forces that have shaped, and indeed motivated them. In doing so, this collection of chapters contributes to a better understanding of the structural changes to consumer demand that are currently taking place in advanced economies and their implications for how we understand and strive for economic growth and consumer welfare amidst.No Full Tex
Reputation in Long-Run Relationships
Full text linkWe model a long-run relationship as an infinitely repeated game played by two equally patient agents. In each period, the agents play an extensive-form game of perfect information. There is incomplete information about the type of player 1 while player 2’s type is commonly known. We show that a sufficiently patient player 1 can leverage player 2’s uncertainty about his type to secure his highest payoff in any perfect Bayesian equilibrium of the repeated game.Repeated Games, Reputation, Equal Discount Factor, Long-run Players. JEL Classification Numbers: C73, D83
Long-run risks and financial markets
Full text linkThe recently developed long-run risks asset pricing model shows that concerns about long-run expected growth and time-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can account for the risk premia and asset price fluctuations. In addition, the model can empirically account for the cross-sectional differences in asset returns. Hence, the long-run risks model provides a coherent and systematic framework for analyzing financial markets.Financial markets ; Risk
The long-run Fisher effect: can it be tested?
Full text linkEmpirical support for the long-run Fisher effect, a hypothesis that a permanent change in inflation leads to an equal change in the nominal interest rate, has been hard to come by. This paper provides a plausible explanation of why past studies have been unable to find support for the long-run Fisher effect. This paper argues that the necessary permanent change to the inflation rate following a monetary shock has not occurred in the industrialized countries of Australia, Austria, Belgium, Canada, Denmark, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom, and the United States. Instead, this paper shows that inflation in these countries follows a mean-reverting, fractionally integrated, long-memory process, not the nonstationary inflation process that is integrated of order one or larger found in previous studies of the Fisher effect. Applying a bivariate maximum likelihood estimator to a fractionally integrated model of inflation and the nominal interest rate, the inflation rate in all seventeen countries is found to be a highly persistent, fractionally integrated process with a positive differencing parameter significantly less than one. Hence, in the long run, inflation in these countries will be unaffected by a monetary shock, and a test of the long-run Fisher effect will be invalid and uninformative as to the truthfulness of the long-run Fisher effect hypothesis.
Real Exchange Rate in China : A Long-run Perspective
Full text linkThis paper investigates the RMB exchange rate from a long-run viewpoint. Whether Chinas rapid economic growth brought about real exchange rate appreciation between 1975 and 2002 is empirically examined, based on a supply-side model, the BalassaSemuelson Hypothesis (BSH). The same test is conducted on Japan, Hong Kong, Korea, Malaysia, Singapore, Thailand, the Philippines, Indonesia and India. Our result indicates that the BSH only exists where the industrial structure has been upgraded and the economy has been successfully transformed from an agricultural economy to a manufacturing economy. Interestingly, China, among those where the BSH does not present, appears to be upgrading its industrial and trade structure. We then try to answer the question of why past rapid growth has no significant relationship with the RMB real exchange rate and what factors are underlying the trend of the RMB real exchange rate. We expect an appreciating trend of RMB real exchange rate in the foreseeable future, presuming that Chinas industrial upgrading process continues and the factors pertaining to the BSHs prediction, such as rise of wage rates in both tradables and nontradables, become more significant.RMB real exchange rate, economic growth
- …
