Search Results
Working Paper
Inference Based on Scale, Label, and Economic Restrictions
The results of nearly 100 prominent studies in empirical macroeconomics have been called into question by Baumeister and Hamilton (2018). We show that their concern about distributional asymmetry for a typical question of interest under a uniform prior with respect to the Haar measure is actually driven by an unacknowledged sign restriction. We also demonstrate that such a prior induces symmetric prior distributions over individual impulse responses conditional on the reduced-form parameters, or more generally when the prior over the reduced-form covariance matrix rules out correlation among ...
Journal Article
Breaking Down the Latest Fight Against Inflation
We apply a novel empirical approach to understand the role monetary policy played in post-COVID inflation.
Working Paper
Large SVARs
We develop a new algorithm for inference in structural vector autoregressions (SVARs) identified with sign restrictions that can accommodate big data and modern identification schemes. The key innovation of our approach is to move beyond the traditional accept-reject framework commonly used in sign-identified SVARs. We show that embedding the elliptical slice sampling within a Gibbs sampler can deliver dramatic gains in computational speed and render previously infeasible applications tractable. To illustrate the approach in the context of sign-identified SVARs, we use a tractable example. We ...
Working Paper
Uniform Priors for Impulse Responses
There has been a call for caution when using the conventional method for Bayesian inference in set-identified structural vector autoregressions on the grounds that the uniform prior over the set of orthogonal matrices could be nonuniform for individual impulse responses or other quantity of interest. This paper challenges this call by formally showing that, when the focus is on joint inference, the uniform prior over the set of orthogonal matrices is not only sufficient but also necessary for inference based on a uniform joint prior distribution over the identified set for the vector of ...
Working Paper
Are Fiscal Transfers Inflationary?
We assess the inflationary effects of fiscal transfers by leveraging advances in the identification of fiscal policy shocks within the recently proposed rotation-invariant time-varying structural vector autoregression. Our analysis suggests that fiscal transfer shocks account for a sizable share of the early post-pandemic increase in the price level through mid-2021. Thereafter, the rise in the price level is dominated by adverse supply shocks (especially supply-chain disruptions), while demand shocks mainly matter later for the lift-off in short-term interest rates. In addition, we find that ...
Working Paper
The Systematic Component of Monetary Policy in SVARs: An Agnostic Identification Procedure
Following Leeper, Sims, and Zha (1996), we identify monetary policy shocks in SVARs by restricting the systematic component of monetary policy. In particular, we impose sign and zero restrictions only on the monetary policy equation. Since we do not restrict the response of output to a monetary policy shock, we are agnostic in Uhlig's (2005) sense. But, in contrast to Uhlig (2005), our results support the conventional view that a monetary policy shock leads to a decline in output. Hence, our results show that the contractionary effects of monetary policy shocks do not hinge on questionable ...
Working Paper
Uniform Priors for Impulse Responses
There has been a call for caution when using the conventional method for Bayesian inference in set-identified structural vector autoregressions on the grounds that the uniform prior over the set of orthogonal matrices could be nonuniform for key objects of interest. This paper challenges this call. Although the prior distributions of individual impulse responses induced by the conventional method may be nonuniform, they typically do not drive the posteriors if one does not condition on the reduced-form parameters. Importantly, when the focus is on joint inference, the uniform prior over the ...
Journal Article
Tracking Business Conditions in Delaware
To meet the need for a gauge of current regional conditions at high frequency, we have built a real-time daily index to monitor business conditions in Delaware. What are the current conditions in the First State? How have these conditions evolved since the 1990s?
Working Paper
Inference Based on SVARs Identified with Sign and Zero Restrictions: Theory and Applications
In this paper, we develop algorithms to independently draw from a family of conjugate posterior distributions over the structural parameterization when sign and zero restrictions are used to identify SVARs. We call this family of conjugate posterior distributions normal-generalized-normal. Our algorithms draw from a conjugate uniform-normal-inverse-Wishart posterior over the orthogonal reduced-form parameterization and transform the draws into the structural parameterization; this transformation induces a normal-generalized-normal posterior distribution over the structural parameterization. ...
Working Paper
Inference Based on SVARs Identified with Sign and Zero Restrictions: Theory and Applications
Are optimism shocks an important source of business cycle fluctuations? Are deficit-financed tax cuts better than deficit-financed spending to increase output? These questions have been previously studied using SVARs identified with sign and zero restrictions and the answers have been positive and definite in both cases. While the identification of SVARs with sign and zero restrictions is theoretically attractive because it allows the researcher to remain agnostic with respect to the responses of the key variables of interest, we show that current implementation of these techniques does not ...