Search Results
Working Paper
Maximum likelihood in the frequency domain: the importance of time-to-plan
The authors illustrate the use of various frequency-domain tools for estimating and testing dynamic, stochastic, general-equilibrium models. Their substantive results confirm other findings that suggest that time-to-plan in investment technology has a potentially useful role to play in business-cycle models.
Working Paper
Maximum likelihood in the frequency domain: a time to build example
The Gaussian log-likelihood can be expressed as the sum over different frequency components. This implies that the likelihood ratio statistic has a similar linear decomposition. Exploiting these observations, the authors devise diagnostic methods that are useful for interpreting maximum-likelihood parameter estimates and likelihood ratio tests. They apply the methods to estimating and testing two real business-cycle models and reject the standard model in favor of an alternative in which capital investment requires a planning period.
Journal Article
The elusive boost from cheap oil
The plunge in oil prices since the middle of 2014 has not translated into a dramatic boost for consumer spending, which has continued to grow moderately. This has been particularly surprising since the sharp drop should free up income for households to use toward other purchases. Lessons from an empirical model of learning suggest that the weak response may reflect that consumers initially viewed cheaper oil as a temporary condition. If oil prices remain low, consumer perceptions could change, which would boost spending.
Journal Article
Forecasting China's Role in World Oil Demand
Although China?s growth has slowed recently, the country?s demand for oil could be entering a period of faster growth that could result in substantially higher oil prices. Because Americans buy and sell oil and petroleum products in the global market, global demand prospects influence the profitability of U.S. oil producers and the costs paid by U.S. consumers. Analysis based on the global relationship between economic development and oil demand illustrates the prospects for Chinese oil demand growth and the resulting opportunities and challenges for U.S. producers and consumers.
Working Paper
Learning in the Oil Futures Markets: Evidence and Macroeconomic Implications
Using expectations embodied in oil futures prices, we examine how expectations are formed and how they affect the macroeconomic transmission of shocks. We show that an empirical framework in which investors form expectations by learning about the persistence of oil-price movements successfully replicates the fluctuations in oil-price futures since the late 1990s. We then embed this learning mechanism in a model with oil usage and storage. Estimating the model, we document that an increase in the persistence of TFP-driven fluctuations in oil demand largely account for investors' perceptions ...
Working Paper
Entry dynamics and the decline in exchange-rate pass-through
The degree of exchange-rate pass-through to import prices is low. An average passthrough estimate for the 1980s would be roughly 50 percent for the United States implying that, following a 10 percent depreciation of the dollar, a foreign exporter selling to the U.S. market would raise its price in the United States by 5 percent. Moreover, substantial evidence indicates that the degree of pass-through has since declined to about 30 percent. ; Gust, Leduc, and Vigfusson (2010) demonstrate that, in the presence of pricing complementarity, trade integration spurred by lower costs for importers ...
Working Paper
Oil, Equities, and the Zero Lower Bound
From late 2008 to 2017, oil and equity returns were more positively correlated than in other periods. In addition, we show that both oil and equity returns became more responsive to macroeconomic news. We provide empirical evidence and theoretical justification that these changes resulted from nominal interest rates being constrained by the zero lower bound (ZLB). Although the ZLB alters the economic environment in theory, supportive empirical evidence has been lacking. Our paper provides clear evidence of the ZLB altering the economic environment, with implications for the effectiveness of ...
Working Paper
Measuring Inclusion: Gender and Coauthorship at the Federal Reserve Board
Relative to diversity, inclusion is much harder to measure. We measure inclusion of women in economics using novel data on coauthoring relationships among Federal Reserve Board economists. Individual coauthoring relationships are voluntary, yet inclusion in coauthoring networks can be central to research productivity and career success. We document gender affinity in coauthoring, with individuals up to 34 percent more likely to have a same-gender coauthor in the data relative to what would be predicted by random assignment. Because women account for under 30 percent of Federal Reserve Board ...
Discussion Paper
Oil, Equities, and a "Nonbinding" Zero Lower Bound: The Monetary Policy Response to COVID-19
We analyze the recent behavior of oil and equity prices in the context of our earlier work, Datta, et al. (2021), which focuses on the previous zero lower bound (ZLB) episode, in the aftermath of the Global Financial Crisis. We find that the correlation between oil and equity returns and the responsiveness of these returns to macroeconomic surprises are perhaps elevated relative to normal times but somewhat moderated relative to the previous ZLB episode.
Working Paper
The delayed response to a technology shock: a flexible price explanation
I present empirical evidence of how the U.S. economy, including per-capita hours worked, responds to a technology shock. In particular, I present results based on permanent changes to a constructed direct measure of technological change for U.S. manufacturing industries. Based on empirical evidence, some claim that hours worked declines and never recovers in response to a positive technology shock. This paper's empirical evidence suggests that emphasizing the drop in hours worked is misdirected. Because the sharp drop in hours is not present here, the emphasis rather should be on the small ...