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Econometrics

 

  • Research Department Working Papers

    Analysis of Multiple Long Run Relations in Panel Data Models with Applications to Financial Ratios

    This paper provides a new methodology for the analysis of multiple long-run relations in panel data models where the cross-section dimension, n, is large relative to the time-series dimension, T.

  • Research Department Working Papers

    Bubbling Up? What Consumer Expectations Reveal About U.S. Housing Market Exuberance

    This paper investigates the presence of speculative bubbles in the U.S. housing market after the global financial crisis. Unlike standard approaches that rely on observed economic fundamentals, the method used in this paper leverages subjective price expectations from the University of Michigan Survey of Consumers to test for exuberance without imposing a specific model of intrinsic housing values.

  • Research Department Working Papers

    The Conventional Impulse Response Prior in VAR Models with Sign Restrictions

    Some studies have expressed concern that the Gaussian-inverse Wishart-Haar prior typically employed in estimating sign-identified VAR models may be unintentionally informative about the implied prior for the structural impulse responses. This paper discusses how this prior may be reported and makes explicit what impulse response priors a number of recently published studies specified, allowing the readers to decide whether they are comfortable with this prior.

  • Research Department Working Papers

    Tax Progressivity, Economic Booms and Trickle-Up Economics

    This paper proposes a method to decompose changes in the tax structure into orthogonal components measuring the level and progressivity of taxes.

  • Research Department Working Papers

    Revisiting the Interest Rate Effects of Federal Debt

    This paper revisits the relationship between federal debt and interest rates. A common approach in the literature is to regress an expected interest rate on a projection of federal debt. This paper shows that issues related to nonstationarity have become more pronounced over the last 20 years, raising significant concern about the reliability of estimates from this model. The authors argue that estimating the model in first differences rather than in levels addresses these concerns.

  • Research Department Working Papers

    Tempting FAIT: Flexible Average Inflation Targeting and the Post-COVID U.S. Inflation Surge

    In August 2020, the Federal Reserve replaced Flexible Inflation Targeting (FIT) with Flexible Average Inflation Targeting (FAIT), introducing make-up strategies that allow inflation to temporarily exceed the 2% target. Using a synthetic control approach, this paper estimates that FAIT raised CPI inflation by about 1 percentage point and core CPI inflation by 0.5 percentage points, suggesting a moderate impact net of food and energy and a largely temporary effect. The findings are consistent with the hypothesis of a steeper-than-expected post-pandemic Phillips curve in the New Keynesian model.

  • Research Department Working Papers

    Impulse Response Diagnostics for Priors on Parameters in Structural Vector Autoregressions

    This paper proposes verifying that the prior distribution of impulse responses in structural VAR models is not unintentionally informative and discusses diagnostic tools to help practitioners ensure their priors do not unduly influence their reported conclusions.

  • Research Department Working Papers

    Nonparametric Local Projections

    This paper studies the properties of an alternative nonparametric local projection estimator of the conditional and unconditional responses of an outcome variable to an observed identified shock.

  • Globalization Institute Working Paper

    The Contribution of Foreign Holdings of U.S. Treasury Securities to the U.S. Long-Term Interest Rate: An Empirical Investigation of the Impact of the Zero Lower Bound

    This paper finds empirical evidence of a possible structural break in the relationship between the foreign holdings of U.S. Treasury securities and the U.S. long-term interest rate occurring at the time when U.S. monetary policy became constrained at the zero-lower bound (ZLB).

  • Globalization Institute Working Paper

    Just Do IT? An Assessment of Inflation Targeting in a Global Comparative Case Study

    This paper introduces novel measures to assess the effectiveness of inflation targeting (IT) and examines its performance across a broad sample of advanced economies (AEs) and emerging market and developing economies (EMDEs).