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Author:Zha, Tao 

Conference Paper
Macroeconomic switching

We discuss the results of fitting a 6-variable structural VAR in which we allow for certain types of parameter variation over time. Allowing structural equation variances to change over time is extremely important in improving fit. Allowing the coefficients that define the model?s dynamics to change is less important to improving fit, though models with changing parameters are consistent with the data. We pay special attention to a version of the model that allows the monetary policy rule, but not other parts of the model, to show changing coefficients. Results from this model fit some ...
Proceedings , Issue Mar

Report
Four Stylized Facts about COVID-19

We document four facts about the COVID-19 pandemic worldwide relevant for those studying the impact of non-pharmaceutical interventions (NPIs) on COVID-19 transmission. First: across all countries and U.S. states that we study, the growth rates of daily deaths from COVID-19 fell from a wide range of initially high levels to levels close to zero within 20-30 days after each region experienced 25 cumulative deaths. Second: after this initial period, growth rates of daily deaths have hovered around zero or below everywhere in the world. Third: the cross section standard deviation of growth rates ...
Staff Report , Paper 611

Working Paper
Perturbation methods for Markov-switching DSGE model

The macroeconomic environment often changes repeatedly over time, and often in a recurring manner. For example, the economy may switch between periods of high and low growth, or monetary policy may switch between periods of strong versus weak responses to inflation. An important question for economists is how to model the presence of these switches, and to capture how expectations about switches in the future may impact economic behavior. ; This paper develops a methodology for solving dynamic stochastic general equilibrium (DSGE) models in the presence of switching environments. The approach ...
Research Working Paper , Paper RWP 13-01

Working Paper
A Theory of Housing Demand Shocks

Aggregate housing demand shocks are an important source of house price fluctuations in the standard macroeconomic models, and through the collateral channel, they drive macroeconomic fluctuations. These reduced-form shocks, however, fail to generate a highly volatile price-to-rent ratio that comoves with the house price observed in the data (the ?price-rent puzzle?). We build a tractable heterogeneous-agent model that provides a microeconomic foundation for housing demand shocks. The model predicts that a credit supply shock can generate large comovements between the house price and the ...
Working Paper Series , Paper 2019-9

Working Paper
Land Prices and Unemployment

We integrate the housing market and the labor market in a dynamic general equilibrium model with credit and search frictions. The model is confronted with the U.S. macroeconomic time series. Our estimated model can account for two prominent facts observed in the data. First, the land price and the unemployment rate tend to move in opposite directions over the business cycle. Second, a shock that moves the land price is capable of generating large volatility in unemployment. Our estimation indicates that a 10 percent drop in the land price leads to a 0.34 percentage point increase of the ...
Working Paper Series , Paper 2013-22

Working Paper
Land-price dynamics and macroeconomic fluctuations

We argue that positive co-movements between land prices and business investment are a driving force behind the broad impact of land-price dynamics on the macroeconomy. We develop an economic mechanism that captures the co-movements by incorporating two key features into a DSGE model: We introduce land as a collateral asset in firms? credit constraints and we identify a shock that drives most of the observed fluctuations in land prices. Our estimates imply that these two features combine to generate an empirically important mechanism that amplifies and propagates macroeconomic fluctuations ...
Working Paper Series , Paper 2011-26

Working Paper
Asymmetric expectation effects of regime shifts in monetary policy

This paper addresses two substantive issues: (1) Does the magnitude of the expectation effect of regime switching in monetary policy depend on a particular policy regime? (2) Under which regime is the expectation effect quantitatively important? Using two canonical DSGE models, we show that there exists asymmetry in the expectation effect across regimes. The expectation effect under the dovish policy regime is quantitatively more important than that under the hawkish regime. These results suggest that the possibility of regime shifts in monetary policy can have important effects on rational ...
Working Paper Series , Paper 2008-22

Working Paper
Learning, adaptive expectations, and technology shocks

This study explores the macroeconomic implications of adaptive expectations in a standard real business cycle model. When rational expectations are replaced by adaptive expectations, we show that the self-confirming equilibrium is the same as the steady state rational expectations equilibrium for all admissible parameters, but that dynamics around the steady state are substantially different between the two equilibria. The differences are driven mainly by the dampened wealth effect and the strengthened intertemporal substitution effect, not by the escapes emphasized by Williams (2003). As a ...
Working Paper Series , Paper 2008-18

Working Paper
Sources of the Great Moderation: shocks, friction, or monetary policy?

We study the sources of the Great Moderation by estimating a variety of medium-scale DSGE models that incorporate regime switches in shock variances and in the inflation target. The best-fit model, the one with two regimes in shock variances, gives quantitatively different dynamics in comparison with the benchmark constant-parameter model. Our estimates show that three kinds of shocks accounted for most of the Great Moderation and business-cycle fluctuations: capital depreciation shocks, neutral technology shocks, and wage markup shocks. In contrast to the existing literature, we find that ...
Working Paper Series , Paper 2009-01

Working Paper
Do credit constraints amplify macroeconomic fluctuations?

Previous studies on financial frictions have been unable to establish the empirical significance of credit constraints in macroeconomic fluctuations. This paper argues that the muted impact of credit constraints stems from the absence of a mechanism to explain the observed persistent comovements between housing prices and business investment. We develop such a mechanism by incorporating two key features into a DSGE model: we identify shocks that shift the demand for collateral assets and we allow productive agents to be credit-constrained. A combination of these two features enables our model ...
Working Paper Series , Paper 2009-28

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