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GDP Solera: The Ideal Vintage Mix
Almuzara, Martín; Amengual, Dante; Fiorentini, Gabriele; Sentana, Enrique (2022-08-01)
We exploit the information in the successive vintages of gross domestic expenditure (GDE) and gross domestic income (GDI) from the current comprehensive revision to obtain an improved, timely measure of U.S. aggregate output by exploiting cointegration between the different measures and taking their monthly release calendar seriously. We also combine all existing overlapping comprehensive revisions to achieve further improvements. We pay particular attention to the Great Recession and the pandemic, which, despite producing dramatic fluctuations, does not generate noticeable revisions in ...
Staff Reports , Paper 1027

Working Paper
Forecasts of inflation and interest rates in no-arbitrage affine models
Wei, Bin; Gospodinov, Nikolay (2016-02-01)
In this paper, we examine the forecasting ability of an affine term structure framework that jointly models the markets for Treasuries, inflation-protected securities, inflation derivatives, and oil future prices based on no-arbitrage restrictions across these markets. On the methodological side, we propose a novel way of incorporating information from these markets into an affine model. On the empirical side, two main findings emerge from our analysis. First, incorporating information from inflation options can often produce more accurate inflation forecasts than those based on the Survey of ...
FRB Atlanta Working Paper , Paper 2016-3

Working Paper
How To Go Viral: A COVID-19 Model with Endogenously Time-Varying Parameters
Matthes, Christian; Ho, Paul; Lubik, Thomas A. (2020-08-21)
This paper estimates a panel model with endogenously time-varying parameters for COVID-19 cases and deaths in U.S. states. The functional form for infections incorporates important features of epidemiological models but is flexibly parameterized to capture different trajectories of the pandemic. Daily deaths are modeled as a spike-and-slab regression on lagged cases. The paper's Bayesian estimation reveals that social distancing and testing have significant effects on the parameters. For example, a 10 percentage point increase in the positive test rate is associated with a 2 percentage point ...
Working Paper , Paper 20-10

Working Paper
Stock Market Cross-Sectional Skewness and Business Cycle Fluctuations
Ferreira, Thiago Revil T. (2018-03-06)
Using U.S. data from 1926 to 2015, I show that financial skewness?a measure comparing cross-sectional upside and downside risks of the distribution of stock market returns of financial firms?is a powerful predictor of business cycle fluctuations. I then show that shocks to financial skewness are important drivers of business cycles, identifying these shocks using both vector autoregressions and a dynamic stochastic general equilibrium model. Financial skewness appears to reflect the exposure of financial firms to the economic performance of their borrowers.
International Finance Discussion Papers , Paper 1223

Working Paper
Financial Shocks in an Uncertain Economy
Scotti, Chiara (2023-07-07)
The past 15 years have been eventful. The Global Financial Crisis (GFC) reminded us of the importance of a stable financial system to a well-functioning economy, one with low and stable inflation and maximum employment. Given the recent banking stress, we ponder this issue again. The pandemic was a huge shock surrounded by much uncertainty, making precise forecasts within traditional models difficult. And more recently, there has been continuous talk of a soft landing and recession risks.In this paper, I focus on some of the lessons we have learned over the years: (i) uncertainty and tail ...
Working Papers , Paper 2308

Working Paper
A New Approach to Identifying the Real Effects of Uncertainty Shocks
Zhong, Molin; Shin, Minchul (2016-04-25)
This paper proposes a multivariate stochastic volatility-in-vector autoregression model called the conditional autoregressive inverse Wishart-in-VAR (CAIW-in-VAR) model as a framework for studying the real effects of uncertainty shocks. We make three contributions to the literature. First, the uncertainty shocks we analyze are estimated directly from macroeconomic data so they are associated with changes in the volatility of the shocks hitting the macroeconomy. Second, we advance a new approach to identify uncertainty shocks by placing limited economic restrictions on the first and second ...
Finance and Economics Discussion Series , Paper 2016-040

Working Paper
Dynamic Identification Using System Projections on Instrumental Variables
Lewis, Daniel J.; Mertens, Karel (2023-10-06)
We propose System Projections on Instrumental Variables (SP-IV) to identify structural relationships using regressions of impulse responses from local projections or vector autoregressions. Relative to 2SLS with distributed lags as instruments, SP-IV weakens exogeneity requirements and can improve efficiency and effective instrument strength. We describe inference under strong and weak identification. The SP-IV estimator outperforms other estimators of Phillips Curve parameters in simulations. We estimate the Phillips Curve implied by the main business cycle shock of Angeletos et al. (2020) ...
Working Papers , Paper 2204

Working Paper
When Do State-Dependent Local Projections Work?
Kilian, Lutz; Pesavento, Elena; Herrera, Ana María; Goncalves, Silvia (2022-05-06)
Many empirical studies estimate impulse response functions that depend on the state of the economy. Most of these studies rely on a variant of the local projection (LP) approach to estimate the state-dependent impulse response functions. Despite its widespread application, the asymptotic validity of the LP approach to estimating state-dependent impulse responses has not been established to date. We formally derive this result for a structural state-dependent vector autoregressive process. The model only requires the structural shock of interest to be identified. A sufficient condition for the ...
Working Papers , Paper 2205

Working Paper
Sowing the Seeds of Financial Imbalances: The Role of Macroeconomic Performance
Afanasyeva, Elena; Modugno, Michele; Lee, Seung Jung; Jerow, Sam (2020-04-07)
The seeds of financial imbalances are sown in times of buoyant economic growth. We study the link between macroeconomic performance and financial imbalances, focusing on the experience of the United States since the 1960s. We first follow a narrative approach to review historical episodes of significant financial imbalances and find that the onset of financial disturbances typically occurs when the economy is running hot. We then look for evidence of a statistical link between measures of macroeconomic conditions and financial imbalances. In our in-sample analysis, we find that strong ...
Finance and Economics Discussion Series , Paper 2020-028

Working Paper
Inference in Bayesian Proxy-SVARs
Rubio-Ramirez, Juan F.; Waggoner, Daniel F.; Arias, Jonas E. (2021-01-14)
Motivated by the increasing use of external instruments to identify structural vector autoregressions (SVARs), we develop an algorithm for exact finite sample inference in this class of time series models, commonly known as Proxy-SVARs. Our algorithm makes independent draws from any posterior distribution over the structural parameterization of a Proxy-SVAR. Our approach allows researchers to simultaneously use proxies and traditional zero and sign restrictions to identify structural shocks. We illustrate our methods with two applications. In particular, we show how to generalize the ...
FRB Atlanta Working Paper , Paper 2018-16a

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