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Working Paper
Interregional Migration and Housing Vacancy: Theory and Empirics
We examine homeowner vacancy rate interdependencies over time and space through the channel of migration. Our theoretical analysis extends the Wheaton (1990) search and matching model for housing by incorporating interregional spillovers due to some households’ desires to migrate between regions and by allowing for regime-switching behavior. Our empirical analysis of vacancy rates for the entire U.S. and for Census regions provides visual evidence for the possibility of regime-switching behavior. We explicitly test our model by estimating basic Vector Autoregression (VAR) and ...
Working Paper
Mortgage Loss Severities: What Keeps Them So High?
Mortgage loss-given-default (LGD) increased significantly when house prices plummeted during the financial crisis, but it has remained over 40 percent in recent years, despite a strong housing recovery. Our results indicate that the sustained high LGDs post-crisis is due to a combination of an overhang of crisis-era foreclosures and prolonged liquidation timelines, which have offset higher sales recoveries. Simulations show that cutting foreclosure timelines by one year would cause LGD to decrease by 5 to 8 percentage points, depending on the tradeoff between lower liquidation expenses and ...
Working Paper
Censored Density Forecasts: Production and Evaluation
This paper develops methods for the production and evaluation of censored density forecasts. Censored density forecasts quantify forecast risks in a middle region of the density covering a specified probability, and ignore the magnitude but not the frequency of outlying observations. We propose a new estimator that fits a potentially skewed and fat-tailed density to the inner observations, acknowledging that the outlying observations may be drawn from a different but unknown distribution. We also introduce a new test for calibration of censored density forecasts. An application using ...
Working Paper
Comparing Cross-Country Estimates of Lorenz Curves Using a Dirichlet Distribution Across Estimators and Datasets
Chotikapanich and Griffiths (2002) introduced the Dirichlet distribution to the estimation of Lorenz curves. This distribution naturally accommodates the proportional nature of income share data and the dependence structure between the shares. Chotikapanich and Griffiths (2002) fit a family of five Lorenz curves to one year of Swedish and Brazilian income share data using unconstrained maximum likelihood and unconstrained non-linear least squares. We attempt to replicate the authors' results and extend their analyses using both constrained estimation techniques and five additional years of ...
Working Paper
Interregional Migration and Housing Vacancy: Theory and Empirics
We examine homeowner vacancy rate interdependencies over time and space through the channel of migration. Our theoretical analysis extends the Wheaton (1990) search and matching model for housing by incorporating interregional spillovers due to some households’ desires to migrate between regions and by allowing for regime-switching behavior. Our empirical analysis of vacancy rates for the entire U.S. and for Census regions provides visual evidence for the possibility of regime-switching behavior. We explicitly test our model by estimating basic Vector Autoregression (VAR) and ...
Working Paper
Should Children Do More Enrichment Activities? Leveraging Bunching to Correct for Endogeneity
We study the effects of enrichment activities such as reading, homework, and extracurricular lessons on children's cognitive and non-cognitive skills. We take into consideration that children forgo alternative activities, such as play and socializing, in order to spend time on enrichment. Our study controls for selection on unobservables using a novel approach which leverages the fact that many children spend zero hours per week on enrichment activities. At zero enrichment, confounders vary but enrichment does not, which gives us direct information about the effect of confounders on skills. ...
Working Paper
Correcting for Endogeneity in Models with Bunching
We show that in models with endogeneity, bunching at the lower or upper boundary of the distribution of the treatment variable may be used to build a correction for endogeneity. We derive the asymptotic distribution of the parameters of the corrected model, provide an estimator of the standard errors, and prove the consistency of the bootstrap. An empirical application reveals that time spent watching television, corrected for endogeneity, has roughly no net effect on cognitive skills and a significant negative net effect on non-cognitive skills in children.
Working Paper
Measuring the Natural Rate of Interest: International Trends and Determinants
U.S. estimates of the natural rate of interest?the real short-term interest rate that would prevail absent transitory disturbances?have declined dramatically since the start of the global financial crisis. For example, estimates using the Laubach-Williams (2003) model indicate the natural rate in the United States fell to close to zero during the crisis and has remained there through the end of 2015. Explanations for this decline include shifts in demographics, a slowdown in trend productivity growth, and global factors affecting real interest rates. This paper applies the Laubach-Williams ...
Working Paper
Impulse Response Functions for Self-Exciting Nonlinear Models
We calculate impulse response functions from regime-switching models where the driving variable can respond to the shock. Two methods used to estimate the impulse responses in these models are generalized impulse response functions and local projections. Local projections depend on the observed switches in the data, while generalized impulse response functions rely on correctly specifying regime process. Using Monte Carlos with different misspecifications, we determine under what conditions either method is preferred. We then extend model-average impulse responses to this nonlinear ...
Working Paper
Nonlinear Budget Set Regressions for the Random Utility Model
This paper is about the nonparametric regression of a choice variable on a nonlinear budget set when there is general heterogeneity, i.e., in the random utility model (RUM). We show that utility maximization makes this a three-dimensional regression with piecewise linear, convex budget sets with a more parsimonious specification than previously derived. We show that the regression allows for measurement and/or optimization errors in the outcome variable. We characterize all of the restrictions of utility maximization on the budget set regression and show how to check these restrictions. We ...