Macroeconomic Applications Research Articles

Information-theoretic estimation of preference parameters: macroeconomic applications and simulation evidence

This paper investigates the behaviour of estimators based on the Kullback–Leibler information criterion (KLIC), as an alternative to the generalized method of moments (GMM). We first study the estimators in a Monte Carlo simulation model of consumption growth with power utility. Then we compare KLIC and GMM estimators in macroeconomic applications, in which preference parameters are estimated with aggregate data. KLIC probability measures serve as useful diagnostics. In dependent data, tests of overidentifying restrictions in the KLIC framework have size properties comparable to those of the J-test in iterated GMM, but superior size-adjusted power.

Measuring predictability: theory and macroeconomic applications

AbstractWe propose a measure of predictability based on the ratio of the expected loss of a short‐run forecast to the expected loss of a long‐run forecast. This predictability measure can be tailored to the forecast horizons of interest, and it allows for general loss functions, univariate or multivariate information sets, and covariance stationary or difference stationary processes. We propose a simple estimator, and we suggest resampling methods for inference. We then provide several macroeconomic applications. First, we illustrate the implementation of predictability measures based on fitted parametric models for several US macroeconomic time series. Second, we analyze the internal propagation mechanism of a standard dynamic macroeconomic model by comparing the predictability of model inputs and model outputs. Third, we use predictability as a metric for assessing the similarity of data simulated from the model and actual data. Finally, we outline several non‐parametric extensions of our approach. Copyright © 2001 John Wiley & Sons, Ltd.

Imperfect Competition, Technology Innovation, and Multiproduct Firms

Both horizontal and vertical innovations are studied in this paper, using monopolistic and oligopolistic competition models with multiproduct firms. We consider a two-stage game. In the first stage, all firms simultaneously choose their own number of products. In the second stage, firms make price decisions to maximize the sum of profits for their own products where a compound CES utility function is considered. We assume that the elasticity of substitution across the products produced within the same firm is different from the elasticity of substitution across the products produced by different firms. A firm's innovation level is shown to increase either as income increases or as the firm's entry cost increases. The firm's innovation level decreases either when the elasticity of substitution across products produced by different firms increases or when the marginal cost of innovation increases. In a symmetric equilibrium, firms produce differentiated products with the same level of quality. In contrast to other imperfect competition models with multiproduct firms, the model studied in this paper has the following characteristics: 1) The model is simple and sufficiently general. The model is made easily comparable with the Dixit-Stiglitz (1977) model to increase applicability. 2) The product managers of the same firm behave cooperatively rather than independently. 3) The number of firms is endogenous rather than exogenous, which is determined by a free-entry condition. Since the marginal innovation cost can connected to the usage of human capital and the entry cost can be connected to the investment cost, the model developed in this paper can be easily applied to the studies of labor market, capital market, and technology market. While the corresponding applications in international trade, industrial organization, and macroeconomics may be interesting, they are left for further research.

An introduction to stochastic unit-root processes

A class of nonlinear processes which have a root that is not constant, but is stochastic, and varying around unity is introduced. The process can be stationary for some periods, and mildly explosive for others. Stochastic unit roots are seen to arise naturally in economic theory, as well as in everyday macroeconomic applications. It is shown that standard tests, such as the augmented Dickey-Fuller test, cannot easily distinguish between exact unit roots and stochastic unit roots. An alternative test which has difference stationarity as the null suggests that exact unit-root models are often rejected in favor of more general nonlinear stochastic unit-root (STUR) models. Estimation is discussed, and, a forecast comparison of linear random walk and AR(p) models, time-varying parameter models, and STUR models suggests that this new class of processes is potentially useful, particularly when the objective is multi-step ahead forecasting.

Contract Renewal Under Uncertainty

The incentive to call for contract renewal to adjust prices is considered from a bilateral perspective in a setting where changes in outside opportunities drive the incentive to renew contracts and costs preclude continuous renewal. A model encompassing several contract forms is formulated, and the existence of an equilibrium to the bilateral renewal game is established. Prices display inertia, and the incumbent contract is found to be more resistant to changes in outside opportunities, the larger the costs of contract renewal, the variability of outside opportunities and the lower the discount rate. The model is shown to match a number of empirical observations on contracts, and in a macroeconomic application of the model it is shown how nominal inertia may arise and why the rate of inflation and monetary uncertainty have real effects.

Stamp 5.0 Structural Time Series Analyser, Modeller and Predictor.

Part 1: installation procedure for STAMP. Part 2 Tutorials on structural time series modelling: getting started on simple univariate modelling tutorial on components tutorial on interventions and explanatory variables tutorial on multivariate models applications in macroeconomics and finance. Part 3 STAMP tutorials: the basic skills tutorial on graphics tutorial on data input and output tutorial on data transformation and description tutorial on model building and testing. Part 4 Statistical output: descriptive statistics statistical treatment of models model output output from STAMP model estimation selected model and estimation output summary statistics the sample period test hyperparameters variances and standard deviations cycle and AR(1) covariance matrices (multivariate models) factor loading matrices (multivariate models) transformed hyperparameters and standard errors final state analysis of state regression analysis seasonal tests cycle tests data in logs goodness of fit prediction error variance prediction error mean deviation coefficients of determination information criteria - AIC and BIC components series with components detrended seasonally adjusted individual seasonals data in logs joint components residuals correlogram periodogram and spectrum cumulative statistics and graphs distribution statistics heteroskedasticity. Part 5 STAMP manuals: general information STAMP files the information and binary data files (.IN7/.BN7) spreadsheet files (.XLS,.WKS,.WK1) human-readable files (.DAT) the information and ASCII data files (.IN7/.DAT) the print file (.PRN) results file (.OUT) PCX files (.PCX) algebra file (.ALG) forecast file (.STF) configuration file (STAMP.CFG) STAMP output the results window is full printscreen graphics the graphics window printing graphs graphics modes graphics display configuration limitations of STAMP memory management out of memory memory is low memory fragmentation saving memory command-line options session logging and playback lags the database size variable names missing values details of algebra STAMP menus. Part 6 Appendices: giveman file open configuration save configuration exit DataManager convert edit information file reconstruct information file compress information and binary file information video system setup colours install 800 x 600 x 16 HPP, PSP and NCDC GRAFPLUS user manual DOS extender manual STAMP error messages.

Comment on J. Pencavel, "Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications"

Comment on J. Pencavel, "Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications"

Comment on J. Pencavel, "Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications"

Comment on J. Pencavel, "Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications"

Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications

Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications

A further study of optimal tracking structure with the offset problem and its macroeconomic application

This paper is concerned with linear multivariable optimal control systems subjected to parameter variations and constant disturbances. A generalized design method of optimal tracking systems is presented and then its steady-state properties are investigated. In particular, the method obtained here is applied to optimal stabilization policies for macroeconomic systems of money supply.

Improvement of dynamic models by inverse eigenproperty assignment

A particular mathematical model often produces results which disagree with data taken from the actual system. It is important to be able to adjust the data used in the calculation of the modes of behaviour to give better agreement between measured and calculated performance, thus showing the desired characteristics. This procedure is seen in terms of the generation of the input vector of the system by appropriate linear feedback of the state vector, such that prescribed eigenproperties are associated with the resultant dynamic closed-loop system. The technique is illustrated by an application in macroeconomics.

Qualitative Problems in Matrix Theory

Qualitative Problems in Matrix Theory