Search Results
Working Paper
Forecasting macro variables with a Qual VAR business cycle turning point index
One criticism of VAR forecasting is that macroeconomic variables tend not to behave as linear functions of their own past around business cycle turning points. This article investigates the methods and efficacy of forecasting with a VAR that expands the information set to include dynamic forecasts of a qualititative variable - business cycle turning points. We apply this Qual VAR model to five of the G7 economies and find that the Qual VAR improves on forecasts from standard models, both for the qualitative variable and for macroeconomic data, such as industrial production. The improvement in ...
Working Paper
Market microstructure effects on the direct measurement of the early exercise premium in exchange-listed options
The Chicago Board Options Exchange concurrently listed European-style and American-style options on the Standard and Poor?s 500 Index from April 2, 1986 through June 20, 1986. We match near-the-money American option quotes with the most nearly contemporaneous, otherwise identical, European option quote. In this unique sample, the bid-ask spread for the American options is twice as large as the bid-ask spread for the European options. We find that the differences in the size of the bid-ask spreads and non-contemporaneous observations create an errors-in-variables problem that, if ignored, ...
Journal Article
Can nominal GDP targeting rules stabilize the economy?
Working Paper
Directly measuring early exercise premiums using American and European S&P 500 index options
The Chicago Board Options Exchange concurrently listed European-style and American-style options on the Standard and Poor's 500 Index from April 2, 1986 through June 20, 1986. This unique time period allows for a direct measurement of the early-exercise premium in American-style index options. In this study, using ask quotes, we find average early exercise premiums ranging from 5.04% to 5.90% for calls, and from 7.97% to 10.86% for puts. Additionally, we are able to depict a potentially useful functional form of the early exercise premium. As in previous studies, we find some instances of ...
Working Paper
A monetary policy feedback rule in Korea's fast-growing economy
In Korea's high-growth economy, the Bank of Korea had been willing to tolerate double-digit inflation, provided that it remained at "non-explosive" levels. In this article, we estimate a monetary policy feedback rule for Korea and find that the upper threshold of tolerable inflation for the Bank of Korea was about 20 percent. It appears that the Bank of Korea's disciplined, rule-like approach to monetary policy was able to control inflation and keep it away from explosive levels, despite the well-know empirical regularity that inflation becomes more variable at higher levels. After 1983, ...
Working Paper
Multivariate contemporaneous threshold autoregressive models
In this paper we propose a contemporaneous threshold multivariate smooth transition autoregressive (C-MSTAR) model in which the regime weights depend on the ex ante probabilities that latent regime-specific variables exceed certain threshold values. The model is a multivariate generalization of the contemporaneous threshold autoregressive model introduced by Dueker et al. (2007). A key feature of the model is that the transition function depends on all the parameters of the model as well as on the data. The stability and distributional properties of the proposed model are investigated. The ...
Working Paper
The practice boundaries of advanced practice nurses: an economic and legal analysis
The purpose of this study is to examine the causes and effects of State regulation that determines the extent of professional independence of advanced practice nurses (APNs). We analyze determinants of these regulations in panel data across States. We find that in States where APNs have acquired a substantial amount of professional independence, the earnings of APNs are substantially lower, and those of physicians' assistants are substantially higher, than in other States. These results are striking since physicians' assistants are in direct competition with APNs; the only real operational ...
Working Paper
Aggregate price shocks and financial stability: the United Kingdom 1796-1999
This paper investigates the impact historically of aggregate price shocks on financial stability in the United Kingdom. We construct an annual index of U.K. financial conditions for 1790-1999 and use a dynamic probit model to estimate the effect of aggregate price shocks on the index. We find that price level shocks contributed significantly to financial instability during 1820-1931, and that inflation rate shocks contributed to instability during 1972-99. Both the nature of aggregate price shocks and their impact depend on the existing monetary and financial regime, but price shocks ...
Journal Article
FOMC decisions and bond market uncertainty
Journal Article
The preemptive Fed