Search Results
Working Paper
Drivers of Wage and Employment Growth in Recent Years: A Supply and Demand Decomposition
Understanding whether labor market developments stem from supply or demand forces has fundamental implications for the conduct of monetary policy. This article develops a structural vector autoregression (VAR) methodology to decompose U.S. employment and wage growth into supply and demand components using sign restrictions. Extending Shapiro (2026), we separately identify trend growth, current shocks, and past shocks across different industries. Results reveal that goods-producing sectors experienced strong demand-driven growth in 2022, which subsequently weakened as Federal Reserve ...
Working Paper
Drivers of Wage and Employment Growth in Recent Years: A Supply and Demand Decomposition
Understanding whether labor market developments stem from supply or demand forces has fundamental implications for the conduct of monetary policy. This article develops a structural vector autoregression (VAR) methodology to decompose U.S. employment and wage growth into supply and demand components using sign restrictions. Extending Shapiro (2026), we separately identify trend growth, current shocks, and past shocks across different industries. Results reveal that goods-producing sectors experienced strong demand-driven growth in 2022, which subsequently weakened as Federal Reserve ...
Working Paper
Incorporating Short Data into Large Mixed-Frequency VARs for Regional Nowcasting
Interest in regional economic issues coupled with advances in administrative data is driving the creation of new regional economic data. Many of these data series could be useful for nowcasting regional economic activity, but they suffer from a short (albeit constantly expanding) time series which makes incorporating them into nowcasting models problematic. Regional nowcasting is already challenging because the release delay on regional data tends to be greater than that at the national level, and "short" data imply a "ragged edge" at both the beginning and the end of regional data sets, ...
Working Paper
Local Projections for Applied Economics
The dynamic causal effect of an intervention on an outcome is of paramount interest to applied macro- and micro-economics research. However, this question has been generally approached differently by the two literatures. In making the transition from traditional time series methods to applied microeconometrics, local projections can serve as a natural bridge. Local projections can translate the familiar language of vector autoregressions (VARs) and impulse responses into the language of potential outcomes and treatment effects. There are gains to be made by both literatures from greater ...
Working Paper
Financial Nowcasts and Their Usefulness in Macroeconomic Forecasting
Financial data often contain information that is helpful for macroeconomic forecasting, while multistep forecast accuracy also benefits by incorporating good nowcasts of macroeconomic variables. This paper considers the role of nowcasts of financial variables in making conditional forecasts of real and nominal macroeconomic variables using standard quarterly Bayesian vector autoregressions (BVARs). For nowcasting the quarterly value of a variety of financial variables, we document that the average of the available daily data and a daily random walk forecast to fill in the missing days in the ...
Working Paper
National and Regional Housing Vacancy: Insights Using Markov-switching Models
We examine homeowner vacancy rates over time and space using Markov-switching models. Our theoretical analysis extends the Wheaton (1990) search and matching model for housing by incorporating regime-switching behavior and interregional spillovers. Our approach is strongly supported by our empirical results. Estimations, using constant-only as well as Vector Autoregressions, allow us to examine differences in vacancy rates as well as explore the possibility of asymmetries within and across housing markets, depending on the state/regime (e.g., low or high vacancy) of a given housing market. ...
Working Paper
Weak Instrument Bias in Impulse Response Estimators
We approximate the finite-sample distribution of impulse response function (IRF) estimators that are just-identified with a weak instrument using the conventional local-to-zero asymptotic framework. Since the distribution lacks a mean, we assess bias using the mode and conclude that researchers prioritizing robustness against weak instrument bias should favor vector autoregressions (VARs) over local projections (LPs). Existing testing procedures are ill-suited for assessing weak instrument bias in IRF estimates, and we propose a novel simple test based on the usual first-stage F-statistic. We ...
Working Paper
Estimating (Markov-Switching) VAR Models without Gibbs Sampling: A Sequential Monte Carlo Approach
Vector autoregressions with Markov-switching parameters (MS-VARs) fit the data better than do their constant-parameter predecessors. However, Bayesian inference for MS-VARs with existing algorithms remains challenging. For our first contribution, we show that Sequential Monte Carlo (SMC) estimators accurately estimate Bayesian MS-VAR posteriors. Relative to multi-step, model-specific MCMC routines, SMC has the advantages of generality, parallelizability, and freedom from reliance on particular analytical relationships between prior and likelihood. For our second contribution, we use SMC's ...
Working Paper
Reconciled Estimates of Monthly GDP in the US
In the US, income and expenditure-side estimates of GDP (GDPI and GDPE) measure "true" GDP with error and are available at a quarterly frequency. Methods exist for using these proxies to produce reconciled quarterly estimates of true GDP. In this paper, we extend these methods to provide reconciled historical true GDP estimates at a monthly frequency. We do this using a Bayesian mixed frequency vector autoregression (MF-VAR) involving GDPE, GDPI, unobserved true GDP, and monthly indicators of short-term economic activity. Our MF-VAR imposes restrictions that reflect a measurement-error ...
Working Paper
Interpreting Shocks to the Relative Price of Investment with a Two-Sector Model
Consumption and investment comove over the business cycle in response to shocks that permanently move the price of investment. The interpretation of these shocks has relied on standard one-sector models or on models with two or more sectors that can be aggregated. However, the same interpretation continues to go through in models that cannot be aggregated into a standard one-sector model. Furthermore, such a two-sector model with distinct factor input shares across production sectors and commingling of sectoral outputs in the assembly of final consumption and investment goods, in line with ...