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Jel Classification:C30 

Working Paper
Identifying Global and National Output and Fiscal Policy Shocks Using a GVAR

The paper contributes to the growing Global VAR (GVAR) literature by showing how global and national shocks can be identified within a GVAR framework. The usefulness of the proposed approach is illustrated in an application to the analysis of the interactions between public debt and real output growth in a multi-country setting, and the results are compared to those obtained from standard single-country VAR analysis. We find that on average (across countries) global shocks explain about one-third of the long-horizon forecast error variance of output growth, and about one-fifth of the long-run ...
Globalization Institute Working Papers , Paper 351

Working Paper
Can We Take the “Stress” Out of Stress Testing? Applications of Generalized Structural Equation Modeling to Consumer Finance

Financial firms, and banks in particular, rely heavily on complex suites of interrelated statistical models in their risk management and business reporting infrastructures. Statistical model infrastructures are often developed using a piecemeal approach to model building, in which different components are developed and validated separately. This type of modeling framework has significant limitations at each stage of the model management life cycle, from development and documentation to validation, production, and redevelopment. We propose an empirical framework, spurred by recent developments ...
Working Papers , Paper 21-01

Working Paper
From Organization to Activity in the US Collateralized Interbank Market

This paper studies and connects market organization and activity in the US collateralized interbank market using an assumption-neutral approach. We apply cluster analysis to aggregate activity factors suggested by prior studies to support two market organizations: three-tier and core-periphery. We find that four bank-specific factors and one economic conditions factor explain interbank activity for both alternative organizations. We also find evidence that the interbank market organization affects institutions? borrowing and lending. While both organizations moderate interbank activity, the ...
Working Papers (Old Series) , Paper 1529

Journal Article
FRED-QD: A Quarterly Database for Macroeconomic Research

In this article, we present and describe FRED-QD, a large, quarterly frequency macroeconomic database that is currently available and regularly updated at https://research.stlouisfed.org/econ/mccracken/fred-databases/. The data provided are closely modeled to that used in Stock and Watson (2012a). As in our previous work on FRED-MD (McCracken and Ng, 2016), which is at a monthly frequency, our goal is simply to provide a publicly available source of macroeconomic "big data" that is updated in real time using the FRED® data service. We show that factors extracted from the FRED-QD dataset ...
Review , Volume 103 , Issue 1 , Pages 1-44

Working Paper
FRED-QD: A Quarterly Database for Macroeconomic Research

In this paper we present and describe a large quarterly frequency, macroeconomic database. The data provided are closely modeled to that used in Stock and Watson (2012a). As in our previous work on FRED-MD, our goal is simply to provide a publicly available source of macroeconomic “big data” that is updated in real time using the FRED database. We show that factors extracted from this data set exhibit similar behavior to those extracted from the original Stock and Watson data set. The dominant factors are shown to be insensitive to outliers, but outliers do affect the relative influence ...
Working Papers , Paper 2020-005

Working Paper
Firm Dynamics and the Origins of Aggregate Fluctuations

What drives aggregate fluctuations? I test the granular hypothesis, according to which the largest firms in the economy drive aggregate dynamics, by estimating a dynamic factor model with firm-level data and controlling for the propagation of firm-level shocks using multi-firm growth model. Each time series, the growth rate of sales of a specific firm, is decomposed in an unobserved common macroeconomic component and in a residual that I interpret as an idiosyncratic firm-level component. The empirical results suggest that, once I control for aggregate shocks, idiosyncratic shocks do not ...
International Finance Discussion Papers , Paper 1133

Working Paper
Assessing the Evidence on Neighborhood Effects from Moving to Opportunity

The Moving to Opportunity (MTO) experiment randomly assigned housing vouchers that could be used in low-poverty neighborhoods. Consistent with the literature, I find that receiving an MTO voucher had no effect on outcomes like earnings, employment, and test scores. However, after studying the assumptions identifying neighborhood effects with MTO data, this paper reaches a very different interpretation of these results than found in the literature. I first specify a model in which the absence of effects from the MTO program implies an absence of neighborhood effects. I present theory and ...
Working Papers (Old Series) , Paper 1506

Working Paper
BGVAR: Bayesian Global Vector Autoregressions with Shrinkage Priors in R

This document introduces the R library BGVAR to estimate Bayesian global vector autoregressions (GVAR) with shrinkage priors and stochastic volatility. The Bayesian treatment of GVARs allows us to include large information sets by mitigating issues related to overfitting. This improves inference and often leads to better out-of-sample forecasts. Computational efficiency is achieved by using C++ to considerably speed up time-consuming functions. To maximize usability, the package includes numerous functions for carrying out structural inference and forecasting. These include generalized and ...
Globalization Institute Working Papers , Paper 395

Working Paper
How Persistent Are Unconventional Monetary Policy Effects?

Event studies show that the Federal Reserve?s announcements of forward guidance and large Scale asset purchases had large and desired effects on asset prices but they do not tell us how long such effects last. Wright (2012) used a structural vector autoregression (SVAR) to argue that unconventional policies have very transient effects on bond yields, with half-lives of 3 to 6 months. The present paper shows, however, that the SVAR is very possibly misspecified, structurally unstable, forecasts very poorly and therefore delivers spurious inference. In addition, the implied in-sample return ...
Working Papers , Paper 2014-4

Working Paper
Measuring the Effects of Dollar Appreciation on Asia: A Favar Approach

Exchange rate shocks have mixed effects on economic activity in both theory and empirical VAR models. In this paper, we extend the empirical literature by considering the implications of a positive shock to the U.S. dollar in a factor-augmented vector autoregression (FAVAR) model for the U.S. and three large Asian economies: Korea, Japan and China. The FAVAR framework allows us to represent a country?s aggregate economic activity by a latent factor, generated from a broad set of underlying observable economic indicators. To control for global conditions, we also include in the FAVAR a ?global ...
Working Paper Series , Paper 2016-30

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