Do the Hamilton and Beveridge–Nelson filters provide the same information about output gaps? An empirical comparison for practitioners

I compare the empirical performances of the recently-developed Hamilton and Beveridge–Nelson filters of nonstationary time series, using quarterly data on real gross state product in U.S. states. There is meaningful overlap between the two filters, with average correlation coefficients ranging between 0.60 and 0.97. The Hamilton filter and its more recent modification produce cycles of greater volatility and amplitude than the Beveridge–Nelson filter and appear to outperform in pseudo-out-of-sample forecasting exercises of future GSP growth and inflation (though the outperformance is not generally statistically significant). The Beveridge–Nelson filter is, however, less sensitive to realizations of new data.     

Green monetary and fiscal policies: The role of consumer preferences

We establish a two-sector model to simulate the potential effects of green fiscal poli- cies and unconventional green monetary policy on the economy during a recovery or in case of a stimulus policy. We find that instruments such as a carbon tax, an implicit tax on brown loans, and a subsidy for the purchase of green goods are all beneficial to the green sector, in contrast to green quantitative easing. A carbon tax imposed directly on firms in the brown sector is the most effective tool to reduce pollution. More importantly, the marginal effects of green instruments on the economy depend on consumer preferences. Namely, the marginal effects are the most prominent when consumers start to purchase more green goods as an increasing part of their consumption basket. Furthermore, the effects of those green policies are more effective when the elasticity of substitution between green and brown goods increases. This finding suggests that raising consumers’ awareness and ability to consume green goods reinforce the effectiveness of public policies designed for low-carbon transition of the economy.