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Jel Classification:C31 

Working Paper
Simultaneous Spatial Panel Data Models with Common Shocks

I consider a simultaneous spatial panel data model, jointly modeling three effects: simultaneous effects, spatial effects and common shock effects. This joint modeling and consideration of cross-sectional heteroskedasticity result in a large number of incidental parameters. I propose two estimation approaches, a quasi-maximum likelihood (QML) method and an iterative generalized principal components (IGPC) method. I develop full inferential theories for the estimation approaches and study the trade-off between the model specifications and their respective asymptotic properties. I further ...
Supervisory Research and Analysis Working Papers , Paper RPA 17-3

Working Paper
House Price Growth Interdependencies and Comovement

This paper examines house price diffusion across metropolitan areas in the United States. We develop a generalization of the Hamilton and Owyang (2012) Markov-switching model, where we incorporate direct regional spillovers using a spatial weighting matrix. The Markov-switching framework allows consideration for house price movements that occur due to similar timing of downturns across MSAs. The inclusion of the spatial weighting matrix improves fit compared to a standard endogenous clustering model. We find seven clusters of MSAs that experience idiosyncratic recessions plus one distinct ...
Working Papers , Paper 2019-28

Working Paper
Risk-Shifting, Regulation, and Government Assistance

This paper examines an episode when policy response to a financial crisis effectively incentivized financial institutions to reallocate their portfolios toward safe assets. Following a shift to a regime of enhanced regulation and scaled-down public assistance during the savings and loan crisis in 1989, I find that thrifts with a high probability of failure increased their composition of safe assets relative to thrifts with a low probability of failure. The findings also show a shift to safe assets among stock thrifts relative to mutual thrifts, thereby providing evidence of risk-shifting from ...
Research Working Paper , Paper RWP 19-10

Working Paper
When is the Fiscal Multiplier High? A Comparison of Four Business Cycle Phases

We synthesize the recent, at times conflicting, empirical literature regarding whether fiscal policy is more effective during certain points in the business cycle. Evidence of state dependence in the multiplier depends critically on how the business cycle is defined. Estimates of the fiscal multiplier do not change when the unemployment rate is above or below its trend. However, we find that the multiplier is higher when the unemployment rate is increasing relative to when it is decreasing. This result holds using both a long time-series at the U.S. national level and for a panel of U.S. ...
Finance and Economics Discussion Series , Paper 2020-026

Working Paper
Modelling Dependence in High Dimensions with Factor Copulas

his paper presents flexible new models for the dependence structure, or copula, of economic variables based on a latent factor structure. The proposed models are particularly attractive for relatively high dimensional applications, involving fifty or more variables, and can be combined with semiparametric marginal distributions to obtain flexible multivariate distributions. Factor copulas generally lack a closed-form density, but we obtain analytical results for the implied tail dependence using extreme value theory, and we verify that simulation-based estimation using rank statistics is ...
Finance and Economics Discussion Series , Paper 2015-51

Working Paper
Does Medicaid Generosity Affect Household Income?

Almost all recent literature on Medicaid and labor supply has used Affordable Care Act (ACA)-induced Medicaid eligibility expansions in various states as natural experiments. Estimated effects on employment and earnings differ widely due to differences in the scope of eligibility expansion across states and are potentially subject to biases due to policy endogeneity. Using a Regression Kink Design (RKD) framework, this paper takes a uniquely different approach to the identification of the effect of Medicaid generosity on household income. Both state-level data and March CPS data from ...
Working Papers , Paper 1709

Working Paper
Even one is too much: the economic consequences of being a smoker

It is well known that smoking leads to lower wages. However, the mechanism of this negative relationship is not well understood. This analysis includes a decomposition of the wage gap between smokers and nonsmokers, with a variety of definitions of smoking status designed to reflect differences in smoking intensity. This paper finds that nearly two-thirds of the 24 percent selectivity-corrected smoking/nonsmoking wage differential derives from differences in characteristics between smokers and nonsmokers. These results suggest that it is not differences in productivity that drive the smoking ...
FRB Atlanta Working Paper , Paper 2013-03

Working Paper
Effects of US quantitative easing on emerging market economies

We estimate international spillover effects of US Quantitative Easing (QE) on emerging market economies. Using a Bayesian VAR on monthly US macroeconomic and financial data, we first identify the US QE shock with non-recursive identifying restrictions. We estimate strong and robust macroeconomic and financial impacts of the US QE shock on US output, consumer prices, long-term yields, and asset prices. The identified US QE shock is then used in a monthly Bayesian panel VAR for emerging market economies to infer the spillover effects on these countries. We find that an expansionary US QE shock ...
Globalization Institute Working Papers , Paper 255

Working Paper
Common correlated effects estimation of heterogeneous dynamic panel data models with weakly exogenous regressors

This paper extends the Common Correlated Effects (CCE) approach developed by Pesaran (2006) to heterogeneous panel data models with lagged dependent variable and/or weakly exogenous regressors. We show that the CCE mean group estimator continues to be valid but the following two conditions must be satisfied to deal with the dynamics: a sufficient number of lags of cross section averages must be included in individual equations of the panel, and the number of cross section averages must be at least as large as the number of unobserved common factors. We establish consistency rates, derive the ...
Globalization Institute Working Papers , Paper 146

Working Paper
Large panel data models with cross-sectional dependence: a survey

This paper provides an overview of the recent literature on estimation and inference in large panel data models with cross-sectional dependence. It reviews panel data models with strictly exogenous regressors as well as dynamic models with weakly exogenous regressors. The paper begins with a review of the concepts of weak and strong cross-sectional dependence, and discusses the exponent of cross-sectional dependence that characterizes the different degrees of cross-sectional dependence. It considers a number of alternative estimators for static and dynamic panel data models, distinguishing ...
Globalization Institute Working Papers , Paper 153

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