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Jel Classification:C38 

Working Paper
Individual Social Capital and Migration

This paper determines how individual, relative to community, social capital affects individual migration decisions. We make use of nonpublic data from the Social Capital Community Benchmark Survey to predict multidimensional social capital for observations in the Current Population Survey. We find evidence that individuals are much less likely to have moved to a community with average social capital levels lower than their own and that higher levels of community social capital act as positive pull-factor amenities. The importance of that amenity differs across urban/rural locations. We also ...
FRB Atlanta Working Paper , Paper 2018-3

Working Paper
Forecasting U.S. Economic Growth in Downturns Using Cross-Country Data

To examine whether including economic data on other countries could improve the forecast of U.S. GDP growth, we construct a large data set of 77 countries representing over 90 percent of global GDP. Our benchmark model is a dynamic factor model using U.S. data only, which we extend to include data from other countries. We show that using cross-country data produces more accurate forecasts during the global financial crisis period. Based on the latest vintage data on August 6, 2020, the benchmark model forecasts U.S. real GDP growth in 2020:Q3 to be −6.9 percent (year-over-year rate) or 14.9 ...
Research Working Paper , Paper RWP 20-09

Working Paper
Dynamic Factor Copula Models with Estimated Cluster Assignments

This paper proposes a dynamic multi-factor copula for use in high dimensional time series applications. A novel feature of our model is that the assignment of individual variables to groups is estimated from the data, rather than being pre-assigned using SIC industry codes, market capitalization ranks, or other ad hoc methods. We adapt the k-means clustering algorithm for use in our application and show that it has excellent finite-sample properties. Applying the new model to returns on 110 US equities, we find around 20 clusters to be optimal. In out-of-sample forecasts, we find that a model ...
Finance and Economics Discussion Series , Paper 2021-029

Working Paper
Metro Business Cycles

We construct monthly economic activity indices for the 50 largest U.S. metropolitan statistical areas (MSAs) beginning in 1990. Each index is derived from a dynamic factor model based on twelve underlying variables capturing various aspects of metro area economic activity. To accommodate mixed-frequency data and differences in data-publication lags, we estimate the dynamic factor model using a maximum- likelihood approach that allows for arbitrary patterns of missing data. Our indices highlight important similarities and differences in business cycles across MSAs. While a number of MSAs ...
Working Papers , Paper 2014-46

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
The Factor Structure of Disagreement

We estimate a Bayesian three-dimensional dynamic factor model on the individual forecasts in the Survey of Professional Forecasters. The factors extract the most important dimensions along which disagreement comoves across variables. We interpret our results through a general semi-structural dispersed information model. The two most important factors in the data describe disagreement about aggregate supply and demand, respectively. Up until the Great Moderation, supply disagreement was dominant, while in recent decades and particularly during the Great Recession, demand disagreement was most ...
Finance and Economics Discussion Series , Paper 2021-046

Working Paper
Tests of Equal Accuracy for Nested Models with Estimated Factors

In this paper we develop asymptotics for tests of equal predictive ability between nested models when factor-augmented regression models are used to forecast. We provide conditions under which the estimation of the factors does not affect the asymptotic distributions developed in Clark and McCracken (2001) and McCracken (2007). This enables researchers to use the existing tabulated critical values when conducting inference. As an intermediate result, we derive the asymptotic properties of the principal components estimator over recursive windows. We provide simulation evidence on the finite ...
Working Papers , Paper 2015-25

Working Paper
A Global Trade Model for the Euro Area

We propose a model for analyzing euro area trade based on the interaction between macroeconomic and trade variables. First, we show that macroeconomic variables are necessary to generate accurate short-term trade forecasts; this result can be explained by the high correlation between trade and macroeconomic variables, with the latter being released in a more timely manner. Second, the model tracks well the dynamics of trade variables conditional on the path of macroeconomic variables during the great recession; this result makes our model a reliable tool for scenario analysis. Third, we ...
Finance and Economics Discussion Series , Paper 2015-13

Working Paper
Factor Models with Local Factors—Determining the Number of Relevant Factors

We extend the theory on factor models by incorporating “local” factors into the model. Local factors affect only an unknown subset of the observed variables. This implies a continuum of eigenvalues of the covariance matrix, as is commonly observed in applications. We de-rive which factors are pervasive enough to be economically important and which factors are pervasive enough to be estimable using the common principal component estimator. We then introduce a new class of estimators to determine the number of those relevant factors. Un-like existing estimators, our estimators use not only ...
Working Papers , Paper 21-15

Working Paper
Betting the House

Is there a link between loose monetary conditions, credit growth, house price booms, and financial instability? This paper analyzes the role of interest rates and credit in driving house price booms and busts with data spanning 140 years of modern economic history in the advanced economies. We exploit the implications of the macroeconomic policy trilemma to identify exogenous variation in monetary conditions: countries with fixed exchange regimes often see fluctuations in short-term interest rates unrelated to home economic conditions. We use novel instrumental variable local projection ...
Working Paper Series , Paper 2014-28


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