Search Results
Showing results 1 to 4 of approximately 4.
(refine search)
Working Paper
Markov-chain approximations of vector autoregressions: application of general multivariate-normal integration techniques
Discrete Markov chains can be useful to approximate vector autoregressive processes for economists doing computational work. One such approximation method first presented by Tauchen (1986) operates under the general theoretical assumption of a transformed VAR with diagonal covariance structure for the process error term. We demonstrate one simple method of more conveniently treating this approximation problem in practice using readily available multivariate-normal integration techniques to allow for arbitrary positive-semidefinite covariance structures. Examples are provided using processes ...
Working Paper
Time variation in the inflation passthrough of energy prices
From Bayesian estimates of a vector autoregression (VAR) which allows for both coefficient drift and stochastic volatility, we obtain the following three results. First, beginning in approximately 1975, the responsiveness of core inflation to changes in energy prices in the United States fell rapidly and remains muted. Second, this decline in the passthrough of energy inflation to core prices has been sustained through a recent period of markedly higher volatility of shocks to energy inflation. Finally, reduced energy inflation passthrough has persisted in the face of monetary policy which ...
Working Paper
Alternative methods of solving state-dependent pricing models
We use simulation-based techniques to compare and contrast two methods for solving state-dependent pricing models: discretization, which solves and simulates the model on a grid; and collocation, which relies on Chebyshev polynomials. While both methods produce qualitatively similar results, statistically significant quantitative differences do arise. We present evidence favoring discretization over collocation in this context, given a lack of robustness in the latter.
Journal Article
How will unemployment fare following the recession?
Since the start of the recession in December 2007, the U.S. unemployment rate has risen more than four percentage points. Similar sharp increases in unemployment have occurred in other severe recessions, such as those in 1973-75 and 1981-82. In the aftermath of those severe recessions, the economy rapidly recovered and unemployment quickly declined. ; Will unemployment behave similarly following this recession? One reason why unemployment may not fall as quickly this time is that the labor market has changed substantively since the early 1980s. In the two recoveries since then, not only did ...