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Journal Article
New monetary policy tools?
Working Paper
Federal reserve forecasts: asymmetry and state-dependence
We jointly test the rationality of the Federal Reserve?s Greenbook forecasts of infiation, unemployment, and output growth using a multivariate nonseparable asymmetric loss function. We find that the forecasts are rationalizable and exhibit directional asymmetry. The degree of asymmetry depends on the phase of the business cycle: The Greenbook forecasts of output growth are too pessimistic in recessions and too optimistic in expansions. The change in monetary policy that occured in the late 1970s has been attributed in the literature to the Fed coming to terms with the difficulties in ...
Working Paper
Asymmetry, Complementarities, and State Dependence in Federal Reserve Forecasts
Forecasts are a central component of policy making; the Federal Reserve''s forecasts are published in a document called the Greenbook. Previous studies of the Greenbook''s inflation forecasts have found them to be rationalizable but asymmetric if considering particular sub-periods, e.g., before and after the Volcker appointment. In these papers, forecasts are analyzed in isolation, assuming policymakers value them independently. We analyze the Greenbook fore- casts in a framework in which the forecast errors are allowed to interact. We find that allowing the losses to interact makes the ...
Working Paper
Identifying technology shocks in the frequency domain
Since Gal [1999], long-run restricted VARs have become the standard for identifying the effects of technology shocks. In a recent paper, Francis et al. [2008] proposed an alternative to identify technology as the shock that maximizes the forecast-error variance share of labor productivity at long horizons. In this paper, we propose a variant of the Max Share identification, which focuses on maximizing the variance share of labor productivity in the frequency domain. We consider the responses to technology shocks identified from various frequency bands. Two distinct technology shocks emerge. ...
Working Paper
Heterogeneous firms, productivity and poverty traps
We present a model of endogenous total factor productivity which generates poverty traps. We obtain multiple steady-state equilibria for an arbitrarily small degree of increasing returns to scale. While the most productive firms operate across all the steady states, in a poverty trap less productive firms operate as well. This results in lower average firm productivity and lower total factor productivity. In our model a growth miracle is accompanied by a shift of employment from small to large firms, consistent with the empirical evidence. We calibrate our model and relate entry costs to the ...
Journal Article
Institutional causes of output volatility
The authors investigate the relationship between the quality of institutions and output volatility. Using instrumental variable regressions, they address whether higher entry barriers and lower property rights protection lead to higher volatility. They find that a 1-standard-deviation increase in entry costs increases the standard deviation of output growth by roughly 40 percent of its average value in the sample. In contrast, property rights protection has no statistically significant effect on volatility.
Journal Article
Cross - country productivity growth
Journal Article
Changing trends in the labor force: a survey
The composition of the American workforce has changed dramatically over the past half century as a result of both the emergence of married women as a substantial component of the labor force and an increase in the number of minority workers. The aging of the population has contributed to this change as well. In this paper, the authors review the evidence of changing labor force participation rates, estimate the trends in labor force participation over the past 50 years, and find that aggregate participation has stabilized after a period of persistent increases. Moreover, they examine the ...