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Author:Del Negro, Marco 

Dynamic factor models with time-varying parameters: measuring changes in international business cycles

We develop a dynamic factor model with time-varying factor loadings and stochastic volatility in both the latent factors and idiosyncratic components. We employ this new measurement tool to study the evolution of international business cycles in the post-Bretton Woods period, using a panel of output growth rates for nineteen countries. We find 1) statistical evidence of a decline in volatility for most countries, with the timing, magnitude, and source (international or domestic) of the decline differing across countries; 2) some evidence of a decline in business cycle synchronization for ...
Staff Reports , Paper 326

Discussion Paper
Central Bank Solvency and Inflation

The monetary base in the United States, defined as currency plus bank reserves, grew from about $800 billion in 2008 to $2 trillion in 2012, and to roughly $4 trillion at the end of 2014 (see chart below). Some commentators have viewed this increase in the monetary base as a sure harbinger of inflation. For example, one economist wrote that this “unprecedented expansion of the money supply could make the ’70s look benign.” These predictions of inflation rest on the monetarist argument that nominal income is proportional to the money supply. The fact that the money supply has expanded ...
Liberty Street Economics , Paper 20150401

Safety, liquidity, and the natural rate of interest

Why are interest rates so low in the Unites States? We find that they are low primarily because the premium for safety and liquidity has increased since the late 1990s, and to a lesser extent because economic growth has slowed. We reach this conclusion using two complementary perspectives: a flexible time-series model of trends in Treasury and corporate yields, inflation, and long-term survey expectations, and a medium-scale dynamic stochastic general equilibrium (DSGE) model. We discuss the implications of this finding for the natural rate of interest.
Staff Reports , Paper 812

Time-Varying Structural Vector Autoregressions and Monetary Policy: a Corrigendum

This note corrects a mistake in the estimation algorithm of the time-varying structural vector autoregression model of Primiceri (2005) and shows how to correctly apply the procedure of Kim, Shephard, and Chib (1998) to the estimation of VAR, DSGE, factor, and unobserved components models with stochastic volatility. Relative to Primiceri (2005), the main difference in the new algorithm is the ordering of the various Markov Chain Monte Carlo steps, with each individual step remaining the same.
Staff Reports , Paper 619

Discussion Paper
More Than Meets the Eye: Some Fiscal Implications of Monetary Policy

In 2012, the Fed’s remittances to the U.S. Treasury amounted to $88.4 billion. The vast majority of these remittances originated as income from the SOMA portfolio (see the second post in this series for an account of the history of SOMA income). While net income has been high in recent years because of the Fed’s large balance sheet, it is likely to drop in the future as the Fed normalizes interest rates. This is because the Fed will likely face increased interest expense on its reserve balances and possibly realize losses in the case of asset sales. A recent paper by economists at the ...
Liberty Street Economics , Paper 20130815

Discussion Paper
Hey, Economist! Tell Us about the New Applied Macroeconomics and Econometrics Center

Marco Del Negro is the director of the Federal Reserve Bank of New York’s new research center, AMEC, which stands for the Applied Macroeconomics and Econometrics Center. Ahead of hosting its first symposium, “Heterogeneity in Macroeconomics: Implications for Policy,” Liberty Street Economics caught up with Del Negro to learn more about his vision for AMEC.
Liberty Street Economics , Paper 20211105

Journal Article
Inflation: Drivers and Dynamics 2020 Conference Summary

To provide insights into the processes that drive inflationary dynamics, the Federal Reserve Bank of Cleveland holds an annual conference on the topic of inflation: the Inflation: Drivers and Dynamics series. The 2020 installment of the conference was held on May 21-22, 2020. This Commentary summarizes the papers at the conference, which broadly fell into four categories: (1) empirical Phillips curves, (2) networks and Phillips curves, (3) expectations formation, and (4) price-setting behavior and inflation.
Economic Commentary , Volume 2021 , Issue 02 , Pages 7

Discussion Paper
The FRBNY DSGE Model Forecast

The U.S. economy has been in a gradual but slow recovery. Will the future be more of the same? This post presents the current forecasts from the Federal Reserve Bank of New York’s (FRBNY) DSGE model, described in our earlier “Bird’s Eye View” post, and discusses the driving forces behind the forecasts. Find the code used for estimating the model and producing all the charts in this blog series here. (We should reiterate that these are not the official New York Fed staff forecasts, but only an input to the overall forecasting process at the Bank.)
Liberty Street Economics , Paper 20140926

Tax buyouts

The paper studies a fiscal policy instrument that can reduce fiscal distortions, without affecting revenues, in a politically viable way. The instrument is a private contract (tax buyout), offered by the government to each individual citizen, whereby the citizen can choose to pay a fixed price up front in exchange for a given reduction in her tax rate for a prespecified period of time. We consider a dynamic overlapping-generations economy, calibrated to match several features of the U.S. income and wealth distribution, and show that, under simple pricing, the introduction of the buyout is ...
Staff Reports , Paper 467

The FRBNY DSGE model

The goal of this paper is to present the dynamic stochastic general equilibrium (DSGE) model developed and used at the Federal Reserve Bank of New York. The paper describes how the model works, how it is estimated, how it rationalizes past history, including the Great Recession, and how it is used for forecasting and policy analysis.
Staff Reports , Paper 647


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