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Working Paper
Misspecification versus bubbles in hyperinflation data: Monte Carlo and interwar European evidence
Hooker, Mark A. (1997)
This paper analyzes tests of the Cagan hyperinflation-money demand model that have several advantages relative to those in the literature. They do not confound specification error with rational bubbles, are implementable with a linear procedure, and are frequently able to detect periodically collapsing bubbles that have challenged existing tests. After a Monte Carlo analysis, the tests are applied to data from hyperinflations in Austria, Germany, Hungary, and Poland. Strong evidence of model misspecification is found for Austria, while the model with a rational, explosive component well ...
Finance and Economics Discussion Series , Paper 1997-49

Working Paper
The decline of activist stabilization policy: natural rate misperceptions, learning, and expectations
Williams, John C.; Orphanides, Athanasios (2004)
We develop an estimated model of the U.S. economy in which agents form expectations by continually updating their beliefs regarding the behavior of the economy and monetary policy. We explore the effects of policymakers' misperceptions of the natural rate of unemployment during the late 1960s and 1970s on the formation of expectations and macroeconomic outcomes. We find that the combination of monetary policy directed at tight stabilization of unemployment near its perceived natural rate and large real-time errors in estimates of the natural rate uprooted heretofore quiescent inflation ...
International Finance Discussion Papers , Paper 804

Working Paper
Constrained suboptimality in economies with limited communication
Bowman, David (1995)
Economies with limited communication contain an externality which typically makes them Pareto inefficient, even taking into account the communication constraints agents face. In a two period model it is shown that an open and dense set of economies with limited communication are constrained Pareto suboptimal. Thus equilibria of economies with voluntary unemployment, search, or other types of limits on communication are unlikely to be Pareto optimal, even in the absence of moral hazard, adverse selection, or search externalities.
International Finance Discussion Papers , Paper 497

Journal Article
Tracking productivity in real time
Kahn, James A.; Rich, Robert W. (2006-11)
Because volatile short-term movements in productivity growth obscure the underlying trend, shifts in this trend may go unrecognized for years - a lag that can lead to policy mistakes and hence economic instability. This study develops a model for tracking productivity that brings in additional variables to help reveal the trend. The model's success is evident in its ability to detect changes in trend productivity within a year or two of their occurrence. Currently, the model indicates that the underlying trend remains strong despite recent weak productivity data.
Current Issues in Economics and Finance , Volume 12 , Issue Nov

Working Paper
Toward a modern macroeconomic model usable for policy analysis
Sims, Christopher A.; Leeper, Eric M. (1994)
FRB Atlanta Working Paper , Paper 94-5

Working Paper
Modelling inflation dynamics: a critical review of recent research
Whelan, Karl; Rudd, Jeremy B. (2005)
In recent years, a broad academic consensus has arisen around the use of rational expectations sticky-price models to capture inflation dynamics. These models are seen as providing an empirically reasonable characterization of observed inflation behavior once suitable measures of the output gap are chosen; and, moreover, are perceived to be robust to the Lucas critique in a way that earlier econometric models of inflation are not. We review the principal conclusions of this literature concerning: 1) the ability of these models to fit the data; 2) the importance of rational forward-looking ...
Finance and Economics Discussion Series , Paper 2005-66

Working Paper
Imperfect knowledge and the pitfalls of optimal control monetary policy
Williams, John C.; Orphanides, Athanasios (2008)
This paper examines the robustness characteristics of optimal control policies derived under the assumption of rational expectations to alternative models of expectations formation and uncertainty about the natural rates of interest and unemployment. We assume that agents have imperfect knowledge about the precise structure of the economy and form expectations using a forecasting model that they continuously update based on incoming data. We also allow for central bank uncertainty regarding the natural rates of interest and unemployment. We find that the optimal control policy derived under ...
Working Paper Series , Paper 2008-09

Working Paper
Bayesian semiparametric stochastic volatility modeling
Jensen, Mark J.; Maheu, John M. (2008)
This paper extends the existing fully parametric Bayesian literature on stochastic volatility to allow for more general return distributions. Instead of specifying a particular distribution for the return innovation, we use nonparametric Bayesian methods to flexibly model the skewness and kurtosis of the distribution while continuing to model the dynamics of volatility with a parametric structure. Our semiparametric Bayesian approach provides a full characterization of parametric and distributional uncertainty. We present a Markov chain Monte Carlo sampling approach to estimation with ...
FRB Atlanta Working Paper , Paper 2008-15

Report
A simple model of conflicting horizons
Blomberg, S. Brock (1994)
Research Paper , Paper 9417

Working Paper
Optimal foreign borrowing and investment with an endogenous lending constraint
Glick, Reuven; Kharas, Homi J. (1985)
Working Papers in Applied Economic Theory , Paper 86-02

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