Estimating the Output Gap in a Changing Economy

Univariate filters used in output gap estimation are subject to criticism as being purely statistical and having no economic content. The information content of the output gap measures estimated by standard multivariate filtering techniques, on the other hand, can be distorted because of the possibly unrealistic restriction that system parameters stay constant over time. In this study, we seek to address these shortcomings by proposing an output gap estimation method that takes into account changing economic relations. We employ a nonlinear time series framework along with the extended Kalman filter, in which economic content is used by inflation and output gap dynamics and the parameters are allowed to be time varying. We use the Turkish economy as a laboratory to show that our method provides useful results, both in terms of the properties of output gap estimates and for the assessment of change in macroeconomic dynamics.     

The Economics of Software Development by Pair Programmers

Evidence suggests that pair programmers–two programmers working collaboratively on the same design, algorithm, code, or test–perform substantially better than the two would working alone. Improved quality, teamwork, communication, knowledge management, and morale have been among the reported benefits of pair programming. This paper presents a comparative economic evaluation that strengthens the case for pair programming. The evaluation builds on the quantitative results of an empirical study conducted at the University of Utah. The evaluation is performed by interpreting these findings in the context of two different, idealized models of value realization. In the first model, consistent with the traditional waterfall process of software development, code produced by a development team is deployed in a single increment; its value is not realized until the full project completion. In the second model, consistent with agile software development processes such as Extreme Programming, code is produced and delivered in small increments; thus its value is realized in an equally incremental fashion. Under both models, our analysis demonstrates a distinct economic advantage of pair programmers over solo programmers. Based on these preliminary results, we recommend that organizations engaged in software development consider adopting pair programming as a practice that could improve their bottom line. To be able to perform quantitative analyses, several simplifying assumptions had to be made regarding alternative models of software development, the costs and benefits associated with these models, and how these costs and benefits are recognized. The implications of these assumptions are addressed in the paper.     

Monetary policy and long-term US interest rates

This paper assesses the effect of federal funds rate innovations on longer-term US nominal interest rates across different periods. The evidence suggests that these responses change with changes in the monetary policy regime. Time periods considered are pre- and post-1979 and different Federal Reserve Chairman’s tenure. The response of longer-term interest rates to federal funds rate innovations are shown to be smaller and less persistent in the post-1979 period when the Federal Reserve placed more emphasis on inflation.     

Mapping the stocks in MICEX: Who is central in the Moscow Stock Exchange?

In this article, we use partial correlations to derive bi‐directional connections between major firms listed in the Moscow Stock Exchange. We obtain coefficients of partial correlation from the correlation estimates of the Constant Conditional Correlation GARCH (CCC‐GARCH) and the consistent Dynamic Conditional Correlation GARCH (cDCC‐GARCH) models. We map the graph of partial correlations using the Gaussian Graphical Model and apply network analysis to identify the most central firms in terms of both shock propagation and connectedness with others. Moreover we analyze some network characteristics over time and based on these we construct a measure of system vulnerability to external shocks. Our findings suggest that during the crisis interconnectedness between firms strengthens and becomes polarized and the system becomes more vulnerable to systemic shocks. In addition, we found that the most connected firms are the state‐owned firms Sberbank and Gazprom and the private oil company Lukoil, while in terms of the top most central systemic risk contributors, Sberbank gave its place to the NLMK Group.     

EFFECTS OF THE REAL EXCHANGE RATE ON OUTPUT AND INFLATION: EVIDENCE FROM TURKEY

This paper assesses the effects of real depreciation on the economic performance of Turkey by considering quarterly data from 1987:I to 2001:III. The empirical evidence suggests that, contrary to classical wisdom, the real depreciations are contractionary, even when external factors like world interest rates, international trade, and capital flows are controlled. Moreover, the results obtained from the analyses indicate that real exchange rate depreciations are inflationary.