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Report
Estimating dynamic panel models: backing out the Nickell Bias
We propose a novel estimator for the dynamic panel model, which solves the failure of strict exogeneity by calculating the bias in the first-order conditions as a function of the autoregressive parameter and solving the resulting equation. We show that this estimator performs well as compared with approaches in current use. We also propose a general method for including predetermined variables in fixed-effects panel regressions that appears to perform well.
Working Paper
Pre-event Trends in the Panel Event-study Design
We consider a linear panel event-study design in which unobserved confounds may be related both to the outcome and to the policy variable of interest. We provide sufficient conditions to identify the causal effect of the policy by exploiting covariates related to the policy only through the confounds. Our model implies a set of moment equations that are linear in parameters. The effect of the policy can be estimated by 2SLS, and causal inference is valid even when endogeneity leads to pre-event trends (?pre-trends?) in the outcome. Alternative approaches perform poorly in our simulations
Working Paper
How Data Breaches Affect Consumer Credit
We use the 2012 South Carolina Department of Revenue data breach as a natural experiment to study how data breaches and news coverage about them affect consumers? interactions with the credit market and their use of credit. We find that some consumers directly exposed to the breach protected themselves against potential losses from future fraudulent use of stolen information by monitoring their files and freezing access to their credit reports. However, these consumers continued their regular use of existing credit cards and did not switch lenders. The response of consumers exposed to the ...
Working Paper
The Age-Time-Cohort Problem and the Identification of Structural Parameters in Life-Cycle Models
A standard approach to estimating structural parameters in life-cycle models imposes sufficient assumptions on the data to identify the ?age profile" of outcomes, then chooses model parameters so that the model's age profile matches this empirical age profile. I show that this approach is both incorrect and unnecessary: incorrect, because it generally produces inconsistent estimators of the structural parameters, and unnecessary, because consistent estimators can be obtained under weaker assumptions. I derive an estimation method that avoids the problems of the standard approach. I illustrate ...
Working Paper
The Scarcity Value of Treasury Collateral: Repo Market Effects of Security-Specific Supply and Demand Factors
In the repo market, forward agreements are security-specific (i.e., there are no deliverable substitutes), which makes it an ideal place to measure the value of fluctuations in a security's available supply. In this study, we quantify the scarcity value of Treasury collateral by estimating the impact of security-specific demand and supply factors on the repo rates of all the outstanding U.S. Treasury securities. Our results indicate the existence of an economically and statistically significant scarcity premium, especially for shorter-term securities. The estimated scarcity effect is quite ...
Working Paper
Non-linearity in the Inflation-Growth Relationship in Developing Economies: Evidence from a Semiparametric Panel Model
Using data on developing economies, we estimate a flexible semiparametric panel data model that incorporates potentially nonlinear effects of inflation on economic growth. We find that inflation is associated with significantly lower growth only after it reaches about 12 percent, which is notably lower than the comparable estimate obtained from a threshold model. Our results also suggest that models with restrictive functional form assumptions tend to underestimate marginal effects of inflation on economic growth. We also document significant variation in the effect of inflation on growth ...
Working Paper
Density Forecasts in Panel Data Models : A Semiparametric Bayesian Perspective
This paper constructs individual-specific density forecasts for a panel of firms or households using a dynamic linear model with common and heterogeneous coefficients and cross-sectional heteroskedasticity. The panel considered in this paper features a large cross-sectional dimension N but short time series T. Due to the short T, traditional methods have difficulty in disentangling the heterogeneous parameters from the shocks, which contaminates the estimates of the heterogeneous parameters. To tackle this problem, I assume that there is an underlying distribution of heterogeneous parameters, ...
Working Paper
Duration Dependence, Monetary Policy Asymmetries, and the Business Cycle
We produce business cycle chronologies for U.S. states and evaluate the factors that change the probability of moving from one phase to another. We find strong evidence for positive duration dependence in all business cycle phases but find that the effect is modest relative to other state- and national-level factors. Monetary policy shocks also have a strong influence on the transition probabilities in a highly asymmetric way. The effect of policy shocks depends on the current state of the cycle as well as the sign and size of the shock.
Working Paper
The scarcity value of Treasury collateral: Repo market effects of security-specific supply and demand factors
In the special collateral repo market, forward agreements are security-specific, which may magnify demand and supply effects. We quantify the scarcity value of Treasury collateral by estimating the impact of security-specific demand and supply factors on the repo rates of all outstanding U.S. Treasury securities. We find an economically and statistically significant scarcity premium. This scarcity effect is quite persistent, passes through to Treasury market prices, and explains a significant portion of the flow-effects of LSAP programs, providing additional evidence for the scarcity channel ...
Report
Identifying inflation's grease and sand effects in the labor market
Inflation has been accused of causing distortionary prices and wage fluctuations (sand) as well as lauded for facilitating adjustments to shocks when wages are rigid downwards (grease). This paper investigates whether these two effects can be distinguished from each other in a labor market by the following identification strategy: inflation-induced deviations among employer's mean wage-changes represent unintended intramarket distortions (sand), while inflation-induced, inter-occupational wage-changes reflect intended alignments with intermarket forces (grease). Using a unique 40-year panel ...