Trend-cycle correlation, drift break and the estimation of trend and cycle in Canadian GDP

Abstract.  Univariate correlated trend cycle models are highly sensitive to the specifications of breaks in the data. This paper argues, using Monte Carlo experiments, that a bivariate correlated unobserved components (UC) framework with breaks delivers substantially more accurate results for the trend-cycle parameters than the corresponding univariate frameworks in a finite sample size. The paper estimates stochastic trend and cyclical fluctuations in Canada from a bivariate UC model. Results show a fairly volatile stochastic trend after the drift break and the negative trend-cycle shock correlation are accounted for. The estimated cyclical component is large, persistent, and consistent with ECRI denoted Canadian recessions.     

Macroeconomic cycles and the stock market’s reaction to monetary policy

This paper examines cyclical variation in the effect of Fed policy on the stock market. We find a much stronger response of stock returns to unexpected changes in the federal funds target rate in recession and in tight credit market conditions. Using firm-level data, we also show that firms that face financial constraints are more affected by monetary shocks in tight credit conditions than the relatively unconstrained firms. Overall, the results are consistent with the credit channel of monetary policy transmission.     

On measures of technical inefficiency and production uncertainty in stochastic frontier production model with correlated error components

Analysis of the behavior of technical inefficiency with respect to parameters and variables of a stochastic frontier model is a neglected area of research in frontier literature. An attempt in this direction, however, has recently been made. It has been shown that in a “standard” stochastic frontier model that both the firm level technical inefficiency and the production uncertainty are monotonically decreasing with observational error. In this paper we show, considering a stochastic frontier model whose error components are jointly distributed as truncated bivariate normal, that this property holds if and only if the distribution of observational error is negatively skewed. We also derive a necessary and sufficient condition under which both firm level technical inefficiency and production uncertainty are monotonically increasing with noise-inefficiency correlation. We next propose a new measure of the industry level production uncertainty and establish the necessary and sufficient condition for firm level technical inefficiency and production uncertainty to be monotonically increasing with industry level production uncertainty. We also study the limiting probabilistic behavior of these conditions under different parametric configuration of our model. Finally we carry out Monte Carlo simulations to study the sample behavior of the population monotonic property of the firm level technical inefficiency and production uncertainty in our model.

Why were changes in the federal funds rate smaller in the 1990s?

We identify two major changes in the dynamics of the federal funds rate in the 1990s. We model the desired rate in a two‐regime setting, one when the Fed makes no change and the other when the Fed is moving the desired rate to a new level. We find that the 1990s saw a longer duration in the no‐change regime as well as smaller changes in the other regime. The smaller changes were neither due to a less aggressive Fed nor due to lower volatility of the fundamentals. In fact, the Fed responded more aggressively to changes in fundamentals in the 1990s. Copyright © 2004 John Wiley & Sons, Ltd.     

Hours per capita and productivity: evidence from correlated unobserved components models

Recent studies debate the effect of a permanent productivity shock on hours per capita within a structural VAR context. This paper examines the issue using a correlated unobserved components (UC) framework. The estimates show that permanent shocks to productivity are negatively correlated with transitory shocks to hours. This result is robust for non‐stationary or levels stationary specifications of hours. Model comparisons indicate that the data do not favor imposing VAR‐type restrictions on the UC models. Copyright © 2008 John Wiley & Sons, Ltd.     

Estimating earnings trend using unobserved components framework

Regressions for predicting long-term stock returns often use moving averages of earnings as the earnings trend. We show that the earnings trend can be directly estimated using unobserved components models. The estimated trends improve the fit of predictive regressions.     

New measures of the output gap based on the forward-looking new Keynesian Phillips curve

Forward-looking versions of the New Keynesian Phillips curve imply that the output gap, the deviation of the actual output from its natural level due to nominal rigidities, drives the dynamics of inflation relative to expected inflation. We exploit this to set up a bivariate unobserved component model for extracting new estimates of the output gap in the US. The gap estimates are large and persistent even after allowing for correlated trend and cycle shock. We then augment our model to use the information in the unemployment rate. The estimates confirm the presence of a large and persistent cyclical component.     

贸易性洗钱

转运可以增加海运的效率,但这种贸易方式也有缺陷,其中之一是增加了贸易性洗钱（TBML）的可能性。根据2009年美国国务院发布的《国际毒品管制策略报告》,每年国际贸易中都隐藏了价值数十亿美元的洗钱活动。