Consuming price differences persist among eight Texas cities
The differences in what consumers pay for a given product in eight Texas cities increased considerably in the 2000s?Dallas being by far the most expensive city in the sample. A strong price adjustment mechanism, however, ensures that the relative price between any two Texas locations tended to rapidly revert to its mean value
Crude Oil Price Changes Quicker to Register at Gasoline Pump
How big an impact should we expect on gasoline prices? Based on recent research, most of the initial effect showed up quickly at the pump.
A Counterfactual Economic Analysis of COVID-19 Using a Threshold Augmented Multi-Country Model
This paper develops a threshold-augmented dynamic multi-country model (TG-VAR) to quantify the macroeconomic effects of COVID-19. We show that there exist threshold effects in the relationship between output growth and excess global volatility at individual country levels in a significant majority of advanced economies and in the case of several emerging markets. We then estimate a more general multi-country model augmented with these threshold effects as well as long-term interest rates, oil prices, exchange rates and equity returns to perform counterfactual analyses. We distinguish common ...
Voluntary and Mandatory Social Distancing: Evidence on COVID-19 Exposure Rates from Chinese Provinces and Selected Countries
This paper considers a modification of the standard Susceptible-Infected-Recovered (SIR) model of epidemics that allows for different degrees of compulsory as well as voluntary social distancing. It is shown that the fraction of the population that self-isolates varies with the perceived probability of contracting the disease. Implications of social distancing both on the epidemic and recession curves are investigated and their trade off is simulated under a number of different social distancing and economic participation scenarios. We show that mandating social distancing is very effective ...
Size, openness, and macroeconomic interdependence
The curse of dimensionality, a problem associated with analyzing the interaction of a relatively large number of endogenous macroeconomic variables, is a prevailing issue in the open economy macro literature. The most common practice to mitigate this problem is to apply the so-called Small Open Economy Framework (SOEF). In this paper, we aim to review under which conditions the SOEF is a justifiable approximation and how severe the consequences of violation of key conditions might be. Thereby, we use a multicountry general equilibrium model as a laboratory. ; First, we derive the conditions ...
A Bias-Corrected Method of Moments Approach to Estimation of Dynamic Short-T Panels
This paper contributes to the GMM literature by introducing the idea of self-instrumenting target variables instead of searching for instruments that are uncorrelated with the errors, in cases where the correlation between the target variables and the errors can be derived. The advantage of the proposed approach lies in the fact that, by construction, the instruments have maximum correlation with the target variables and the problem of weak instrument is thus avoided. The proposed approach can be applied to estimation of a variety of models such as spatial and dynamic panel data models. In ...
A simple model of price dispersion
This article considers a simple stock-flow matching model with fully informed market participants. Unlike in the standard matching literature, prices are assumed to be set ex-ante. When sellers pre-commit themselves to sell their products at an advertised price, the unique equilibrium is characterized by price dispersion due to the idiosyncratic match payoffs (in a marketplace with full information). This provides new insights into the price dispersion literature, where price dispersion is commonly assumed to be generated by a costly search of uninformed buyers.
The euro and global turbulence: member countries gain stability
The pattern of adjustment of euroarea countries? external competitiveness to dollar and risk aversion shocks has become more similar since the euro?s creation.
A one-covariate at a time, multiple testing approach to variable selection in high-dimensional linear regression models
Model specification and selection are recurring themes in econometric analysis. Both topics become considerably more complicated in the case of large-dimensional data sets where the set of specification possibilities can become quite large. In the context of linear regression models, penalised regression has become the de facto benchmark technique used to trade off parsimony and fit when the number of possible covariates is large, often much larger than the number of available observations. However, issues such as the choice of a penalty function and tuning parameters associated with the use ...
Geographic Inequality of Economic Well-being among U.S. Cities: Evidence from Micro Panel Data
We analyze the geographic inequality of economic well-being among U.S. cities by utilizing a novel measure of quantity based product-level economic well-being, i.e., the number of goods and services that can be purchased by consumers with an average city wage. We find a considerable cross-city dispersion in the economic well-being and the geographic dispersion has been on the steady rise since the mid-1990s for most goods and services under study. Strong geographic correlations exist in the local economic well-being and our empirical analysis based on a Global VAR (GVAR) model suggests that ...