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Methods For Measuring Expectations And Uncertainty In Markov Switching Models
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Book Synopsis Methods for Measuring Expectations and Uncertainty in Markov-switching Models by : Francesco Bianchi
Download or read book Methods for Measuring Expectations and Uncertainty in Markov-switching Models written by Francesco Bianchi and published by . This book was released on 2013 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: I develop a toolbox to analyze the properties of multivariate Markov-switching models. I first derive analytical formulas for the evolution of first and second moments, taking into account the possibility of regime changes. The formulas are then used to characterize the evolution of expectations and uncertainty, the propagation of the shocks, the contribution of the shocks to the overall volatility, and the welfare implications of regime changes in general equilibrium models. Then, I show how the methods can be used to capture the link between uncertainty and the state of the economy. Finally, I generalize Campbell's VAR implementation of Campbell and Shiller's present value decomposition to allow for parameter instability. The applications reveal the importance of taking into account the effects of regime changes on agents' expectations, welfare, and uncertainty. All results are derived analytically, do not require numerical integration, and are therefore suitable for structural estimation.
Book Synopsis Understanding Markov-Switching Rational Expectations Models by : Roger E. A. Farmer
Download or read book Understanding Markov-Switching Rational Expectations Models written by Roger E. A. Farmer and published by . This book was released on 2014 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a set of necessary and sufficient conditions for equilibria to be determinate in a class of forward-looking Markov-switching rational expectations models and we develop an algorithm to check these conditions in practice. We use three examples, based on the new-Keynesian model of monetary policy, to illustrate our technique. Our work connects applied econometric models of Markov-switching with forward looking rational expectations models and allows an applied researcher to construct the likelihood function for models in this class over a parameter space that includes a determinate region and an indeterminate region.
Book Synopsis Understanding Markov-switching rational expectations models by : Roger E. A. Farmer
Download or read book Understanding Markov-switching rational expectations models written by Roger E. A. Farmer and published by . This book was released on 2009 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a set of necessary and sufficient conditions for equilibria to be determinate in a class of forward-looking Markov-switching rational expectations models and we develop an algorithm to check these conditions in practice. We use three examples, based on the new-Keynesian model of monetary policy, to illustrate our technique. Our work connects applied econometric models of Markov-switching with forward looking rational expectations models and allows an applied researcher to construct the likelihood function for models in this class over a parameter space that includes a determinate region and an indeterminate region.
Book Synopsis Understanding Markov-switching Rational Expectations Model by : Roger E.A. Farmer
Download or read book Understanding Markov-switching Rational Expectations Model written by Roger E.A. Farmer and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Characterizing Markov-Switching Rational Expectations Models by : Seonghoon Cho
Download or read book Characterizing Markov-Switching Rational Expectations Models written by Seonghoon Cho and published by . This book was released on 2014 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Markov-switching rational expectations (MSRE) models can yield fresh insights beyond what linear rational expectations (LRE) models have done for macroeconomics, as Davig and Leeper (2007) and Farmer, Waggoner and Zha (2009), among others, have noted and predicted. A lack of tractable methodological foundations, however, may have hindered researchers from uncovering the salient features of MSRE models. This study improves the status quo to a level at which MSRE models can be analyzed as easily and comprehensively as LRE models. Specifically, we provide the conditions for determinacy and indeterminacy in the mean-square stability sense as well as a solution method to general MSRE models. These tasks are accomplished by applying the standard forward method without reference to the eigensystem of a MSRE model, which is unknown due to its inherent nonlinearity. We apply our methodology to a New-Keynesian model subject to regime-switching in monetary policy and find some unforeseen but intuitive determinacy results. Markov-switching in the private sector is also shown to deliver potentially rich dynamics.
Book Synopsis Minimal State Variable Solutions to Markov-Switching Rational Expectations Models by : Roger E. A. Farmer
Download or read book Minimal State Variable Solutions to Markov-Switching Rational Expectations Models written by Roger E. A. Farmer and published by . This book was released on 2014 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a new method for computing minimal state variable solutions (MSV) to Markov-switching rational expectations models. We provide an algorithm to compute an MSV solution and show how to test a given solution for uniqueness and boundedness. We construct an example that is calibrated to U.S. data and show that the MSV solution in our example is unique. This solution can potentially explain in three different ways the observed reduction in the variance of inflation and the interest rate after 1980: The policy rule might have changed, the variance of the fundamental shocks might have fallen, or the private sector equations might have been different across regimes. We compare these three explanations for the change in variance and show that any one of them can potentially account for the facts. Our paper provides the necessary tools for a future empirical study of this issue.
Book Synopsis Markov-Switching Models with Endogenous Explanatory Variables Ii by : Chang-Jin Kim
Download or read book Markov-Switching Models with Endogenous Explanatory Variables Ii written by Chang-Jin Kim and published by . This book was released on 2004 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a unified framework for a two-step MLE procedure to deal with the problem of endogeneity in Markov-switching regression models. Two important issues are considered. First, a consistent estimation of the Markov-switching regression equation of interest is considered. Second, obtaining correct standard errors of the coefficients estimates in the second step is considered, in light of Pagan's (1984) 'generated regressors.' Our Monte Carlo experiments provide the validity of the proposed methods in small samples. The model and the proposed methods are applied to Campbell and Mankiw's (1989) consumption function, by allowing for possibilities of structural breaks in the sensitivity of consumption growth to the predictable component of income growth. Empirical results suggest that during the 1970's and 1980's, when uncertainty in future income growth was highest, the measure of sensitivity was high and statistically significant, while it was not significant in the rest of the sample.
Book Synopsis Optimal Forecasts from Markov Switching Models by : Andreas Pick
Download or read book Optimal Forecasts from Markov Switching Models written by Andreas Pick and published by . This book was released on 2014 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Expectational Stability in Regime-switching Rational Expectations Models by : William A. Branch
Download or read book Expectational Stability in Regime-switching Rational Expectations Models written by William A. Branch and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Regime-switching rational expectations models, in which the parameters of the model evolve according to a finite state Markov process, have properties that differentiate them from linear models. Issues that are well understood in linear contexts, such as equilibrium determinacy and stability under adaptive learning, re-emerge in this new context. This paper outlines these issues and defines two classes of equilibria that emerge from regime-switching models. The distinguishing feature between the two classes is whether the conditional density of the endogenous state variables depends on past regimes. An assumption on whether agents condition their expectations on past regimes has important implications for determinacy and equilibrium dynamics. The paper addresses the stability properties of the different classes of equilibria under adaptive learning, extending the learning literature to a non-linear framework.
Book Synopsis NBER Macroeconomics Annual 2013 by : Jonathan A. Parker
Download or read book NBER Macroeconomics Annual 2013 written by Jonathan A. Parker and published by University of Chicago Press. This book was released on 2014-05-22 with total page 407 pages. Available in PDF, EPUB and Kindle. Book excerpt: The twenty-eighth edition of the NBER Macroeconomics Annual continues its tradition of featuring theoretical and empirical research on central issues in contemporary macroeconomics. As in previous years, this volume not only addresses recent developments in macroeconomics, but also takes up important policy-relevant questions and opens new debates that will continue for years to come. The first two papers in this year’s issue tackle fiscal and monetary policy, asking how interest rates and inflation can remain low despite fiscal policy behavior that appears inconsistent with a monetary policy regime focused only on inflation and output and not on fiscal balances as recently observed in the U.S. The third examines the implications of reference-dependent preferences and moral hazard in employment fluctuations in the labor market. The fourth paper addresses money and inflation, analyzing the long run inflation rate, the coexistence of money with pledgeable and money-like assets, and why inflation did not increase in response to business-cycle fluctuations in productivity. And the fifth looks at the stock market and how it relates to the real economy. The final chapter discusses the large and public shift towards more expansionary monetary policy that has recently occurred in Japan.
Book Synopsis State-space Models with Regime Switching by : Chang-Jin Kim
Download or read book State-space Models with Regime Switching written by Chang-Jin Kim and published by Mit Press. This book was released on 1999 with total page 297 pages. Available in PDF, EPUB and Kindle. Book excerpt: Both state-space models and Markov switching models have been highly productive paths for empirical research in macroeconomics and finance. This book presents recent advances in econometric methods that make feasible the estimation of models that have both features. One approach, in the classical framework, approximates the likelihood function; the other, in the Bayesian framework, uses Gibbs-sampling to simulate posterior distributions from data.The authors present numerous applications of these approaches in detail: decomposition of time series into trend and cycle, a new index of coincident economic indicators, approaches to modeling monetary policy uncertainty, Friedman's "plucking" model of recessions, the detection of turning points in the business cycle and the question of whether booms and recessions are duration-dependent, state-space models with heteroskedastic disturbances, fads and crashes in financial markets, long-run real exchange rates, and mean reversion in asset returns.
Book Synopsis Expectational Stability in Regime-Switching Rational Expectations Models by : William Branch
Download or read book Expectational Stability in Regime-Switching Rational Expectations Models written by William Branch and published by . This book was released on 2013 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: Regime-switching rational expectations models, in which the parameters of the model evolve according to a amp;finite state Markov process, have properties that differentiate them from linear models. Issues that are well understood in linear contexts, such as equilibrium determinacy and stability under adaptive learning, re-emerge in this new context. This paper outlines these issues and deamp;fines two classes of equilibria that emerge from regime-switching models. The distinguishing feature between the two classes is whether the conditional density of the endogenous state variables depends on past regimes. An assumption on whether agents condition their expectations on past regimes has important implications for determinacy and equilibrium dynamics. The paper addresses the stability properties of the different classes of equilibria under adaptive learning, extending the learning literature to a non-linear framework.
Book Synopsis Handbook of Research Methods in Behavioural Economics by : Morris Altman
Download or read book Handbook of Research Methods in Behavioural Economics written by Morris Altman and published by Edward Elgar Publishing. This book was released on 2023-03-02 with total page 533 pages. Available in PDF, EPUB and Kindle. Book excerpt: This comprehensive Handbook addresses a wide variety of methodological approaches adopted and developed by behavioural economists, exploring the implications of such innovations for analysis and policy.
Book Synopsis An Introduction to Stochastic Modeling by : Howard M. Taylor
Download or read book An Introduction to Stochastic Modeling written by Howard M. Taylor and published by Academic Press. This book was released on 2014-05-10 with total page 410 pages. Available in PDF, EPUB and Kindle. Book excerpt: An Introduction to Stochastic Modeling provides information pertinent to the standard concepts and methods of stochastic modeling. This book presents the rich diversity of applications of stochastic processes in the sciences. Organized into nine chapters, this book begins with an overview of diverse types of stochastic models, which predicts a set of possible outcomes weighed by their likelihoods or probabilities. This text then provides exercises in the applications of simple stochastic analysis to appropriate problems. Other chapters consider the study of general functions of independent, identically distributed, nonnegative random variables representing the successive intervals between renewals. This book discusses as well the numerous examples of Markov branching processes that arise naturally in various scientific disciplines. The final chapter deals with queueing models, which aid the design process by predicting system performance. This book is a valuable resource for students of engineering and management science. Engineers will also find this book useful.
Book Synopsis Discrete Choice Methods with Simulation by : Kenneth Train
Download or read book Discrete Choice Methods with Simulation written by Kenneth Train and published by Cambridge University Press. This book was released on 2009-07-06 with total page 399 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book describes the new generation of discrete choice methods, focusing on the many advances that are made possible by simulation. Researchers use these statistical methods to examine the choices that consumers, households, firms, and other agents make. Each of the major models is covered: logit, generalized extreme value, or GEV (including nested and cross-nested logits), probit, and mixed logit, plus a variety of specifications that build on these basics. Simulation-assisted estimation procedures are investigated and compared, including maximum stimulated likelihood, method of simulated moments, and method of simulated scores. Procedures for drawing from densities are described, including variance reduction techniques such as anithetics and Halton draws. Recent advances in Bayesian procedures are explored, including the use of the Metropolis-Hastings algorithm and its variant Gibbs sampling. The second edition adds chapters on endogeneity and expectation-maximization (EM) algorithms. No other book incorporates all these fields, which have arisen in the past 25 years. The procedures are applicable in many fields, including energy, transportation, environmental studies, health, labor, and marketing.
Book Synopsis An Analysis of the Real Interest Rate Under Regime Shifts by : René Garcia
Download or read book An Analysis of the Real Interest Rate Under Regime Shifts written by René Garcia and published by Montréal : CIRANO. This book was released on 1994 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Business Cycles, Indicators, and Forecasting by : James H. Stock
Download or read book Business Cycles, Indicators, and Forecasting written by James H. Stock and published by University of Chicago Press. This book was released on 2008-04-15 with total page 350 pages. Available in PDF, EPUB and Kindle. Book excerpt: The inability of forecasters to predict accurately the 1990-1991 recession emphasizes the need for better ways for charting the course of the economy. In this volume, leading economists examine forecasting techniques developed over the past ten years, compare their performance to traditional econometric models, and discuss new methods for forecasting and time series analysis.
