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Working Paper
Efficiency and equity of a gasoline tax increase
Working Paper
Effects of risk on the demand for oil inventories
Working Paper
Estimating changes in trend growth of total factor productivity: Kalman and H-P filters versus a Markov-switching framework
Trend growth in total factor productivity (TFP) is unobserved; it is frequently assumed to evolve continuously over time. That assumption is inherent in the use of the Hodrick-Prescott or Bandpass filter to extract trend. Similarly, the Kalman filter/ unobserved-components approach assumes that changes in the trend growth rate are normally distributed. In fact, however, innovations to the trend growth rate of total factor productivity are far from normal. The distribution is fat-tailed, with large outliers in 1973. Allowing for these outliers, the estimated trend growth rate changes only ...
Working Paper
Cleaning up the errors in the monthly \"Employment situation\" report: a multivariate state-space approach
This paper examines the underlying state of the labor market, assuming data in the monthly "Employment Situation" are contaminated by measurement error and other transient noise. To better filter out unobserved noise, the methodology exploits correlations among labor-market series. Household employment and labor force have cross-correlated sampling errors; establishment employment and hours-worked may, also. The Kalman filtering procedure also exploits fundamental economic relationships among these series. Error cross-correlations and economic relationships shape a multivariate labor-market ...
Working Paper
A nonlinear look at trend MFP growth and the business cycle: result from a hybrid Kalman/Markov switching model
The cycle in output and hours worked is not symmetric: it behaves differently around recessions than in expansions. Similarly, the trend in multifactor productivity (MFP) seems to pass through different regimes; there was an extended period of slow MFP growth from about 1973 through 1995, and faster growth thereafter. Typical linear models and linear filters such as the Kalman filter deal poorly with asymmetry and regime changes. This paper attempts to determine more accurately and quickly any shifts in trend MFP growth, using a nonlinear Kalman/Markov filter with a model of the unobserved ...
Working Paper
Why and when do spot prices of crude oil revert to futures price levels?
Recent studies of crude oil price formation emphasize the role of interest rates and convenience yield (the adjusted spot-futures spread), confirming that spot prices mean-revert and normally exceed discounted futures. However, these studies don't explain why such "backwardation" is normal. Also, models derived in these studies typically explain only about 1 percent of daily returns, suggesting other factors are important, too. In this paper, I specify a structural oil-market model that links returns to convenience yield, inventory news, and revisions of expected production cost (growth of ...
Working Paper
Cyclical patterns in the variance of economic activity