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Author:Rubio-Ramirez, Juan F. 

Working Paper
Estimating nonlinear dynamic equilibrium economies: a likelihood approach

This paper presents a framework to undertake likelihood-based inference in nonlinear dynamic equilibrium economies. The authors develop a sequential Monte Carlo algorithm that delivers an estimate of the likelihood function of the model using simulation methods. This likelihood can be used for parameter estimation and for model comparison. The algorithm can deal both with nonlinearities of the economy and with the presence of non-normal shocks. The authors show consistency of the estimate and its good performance in finite simulations. This new algorithm is important because the existing ...
FRB Atlanta Working Paper , Paper 2004-1

Working Paper
Some results on the solution of the neoclassical growth model

This paper presents some new results on the solution of the stochastic neoclassical growth model with leisure. We use the method of Judd (2003) to explore how to change variables in the computed policy functions that characterize the behavior of the economy. We find a simple closed-form relation between the parameters of the linear and the loglinear solution of the model. We extend this approach to a general class of changes of variables and show how to find the optimal transformation. We thus reduce the average absolute Euler equation errors of the solution of the model by a factor of three. ...
FRB Atlanta Working Paper , Paper 2003-34

Working Paper
Nominal versus real wage rigidities: A Bayesian approach

This paper explores the capability of a dynamic stochastic general equilibrium model with staggered price setting and real wage rigidities to fit the data with reasonable average durations of price and wage contracts. The authors implement a Bayesian approach for parameter estimation and for model comparison with other models that only incorporate nominal rigidities. Their main results can be summarized as follows: First, the authors find that, on average, prices are fixed for three quarters, nominal wages are fixed for five quarters, and half of the wage setters follow a real wage indexing ...
FRB Atlanta Working Paper , Paper 2001-22

Working Paper
Computing DSGE models with recursive preferences and stochastic volatility

This paper compares different solution methods for computing the equilibrium of dynamic stochastic general equilibrium (DSGE) models with recursive preferences such as those in Epstein and Zin (1989 and 1991) and stochastic volatility. Models with these two features have recently become popular, but we know little about the best ways to implement them numerically. To fill this gap, we solve the stochastic neoclassical growth model with recursive preferences and stochastic volatility using four different approaches: second- and third-order perturbation, Chebyshev polynomials, and value ...
Finance and Economics Discussion Series , Paper 2012-04

Working Paper
Fiscal policy and minimum wage for redistribution: an equivalence result

In this paper, we derive conditions under which a minimum-wage law combined with anonymous taxes and transfers and an agent-specific tax-transfer scheme are equivalent policies.
FRB Atlanta Working Paper , Paper 2005-08

Working Paper
Bayesian Estimation of Epidemiological Models: Methods, Causality, and Policy Trade-Offs

We present a general framework for Bayesian estimation and causality assessment in epidemiological models. The key to our approach is the use of sequential Monte Carlo methods to evaluate the likelihood of a generic epidemiological model. Once we have the likelihood, we specify priors and rely on a Markov chain Monte Carlo to sample from the posterior distribution. We show how to use the posterior simulation outputs as inputs for exercises in causality assessment. We apply our approach to Belgian data for the COVID-19 epidemic during 2020. Our estimated time-varying-parameters SIRD model ...
Working Papers , Paper 21-18

Working Paper
Comparing New Keynesian models in the Euro area: a Bayesian approach

This paper estimates and compares four versions of the sticky price New Keynesian model for the Euro area, using a Bayesian approach as described in Rabanal and Rubio-Ramrez (2003). We find that the average duration of price contracts is between four and eight quarters, similar to the one estimated in the United States, while price indexation is found to be smaller. On the other hand, average duration of wage contracts is estimated to between one and two quarters, lower than the one found for the United States, while wage indexation is higher. Finally, the marginal likelihood indicates that ...
FRB Atlanta Working Paper , Paper 2003-30

Working Paper
Cointegrated TFP processes and international business cycles

A puzzle in international macroeconomics is that observed real exchange rates are highly volatile. Standard international real business cycle (IRBC) models cannot reproduce this fact. We show that total factor productivity processes for the United States and the rest of the world are characterized by a vector error correction model (VECM) and that adding cointegrated technology shocks to the standard IRBC model helps explaining the observed high real exchange rate volatility. Also, we show that the observed increase of the real exchange rate volatility with respect to output in the past ...
FRB Atlanta Working Paper , Paper 2009-23

Working Paper
Redistribution and fiscal policy

This paper studies the optimal behavior of a democratic government in its use of fiscal policies to redistribute income. I present a stochastic dynamic general equilibrium model with heterogeneous agents to analyze (1) the differences between the effects on the optimal tax rate of permanent and nonpermanent perturbations and (2) the relationship between initial inequality and both steady-state levy and income distribution. In addition, the optimal fiscal policy for the transition is calculated. The analysis leads me to three main conclusions. First, there are no important differences between ...
FRB Atlanta Working Paper , Paper 2002-32

Working Paper
Dividend Momentum and Stock Return Predictability: A Bayesian Approach

A long tradition in macro finance studies the joint dynamics of aggregate stock returns and dividends using vector autoregressions (VARs), imposing the cross-equation restrictions implied by the Campbell-Shiller (CS) identity to sharpen inference. We take a Bayesian perspective and develop methods to draw from any posterior distribution of a VAR that encodes a priori skepticism about large amounts of return predictability while imposing the CS restrictions. In doing so, we show how a common empirical practice of omitting dividend growth from the system amounts to imposing the extra ...
FRB Atlanta Working Paper , Paper 2021-25

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