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Working Paper
When is the Fiscal Multiplier High? A Comparison of Four Business Cycle Phases
Pfajfar, Damjan; http://fedora:8080/fcrepo/rest/objects/authors/; Berge, Travis J. (2020-03-27)
We synthesize the recent, at times conflicting, empirical literature regarding whether fiscal policy is more effective during certain points in the business cycle. Evidence of state dependence in the multiplier depends critically on how the business cycle is defined. Estimates of the fiscal multiplier do not change when the unemployment rate is above or below its trend. However, we find that the multiplier is higher when the unemployment rate is increasing relative to when it is decreasing. This result holds using both a long time-series at the U.S. national level and for a panel of U.S. ...
Finance and Economics Discussion Series , Paper 2020-026

Working Paper
The Dynamic Striated Metropolis-Hastings Sampler for High-Dimensional Models
Zha, Tao; Waggoner, Daniel F.; Wu, Hongwei (2014-11-01)
Having efficient and accurate samplers for simulating the posterior distribution is crucial for Bayesian analysis. We develop a generic posterior simulator called the "dynamic striated Metropolis-Hastings (DSMH)" sampler. Grounded in the Metropolis-Hastings algorithm, it draws its strengths from both the equi-energy sampler and the sequential Monte Carlo sampler by avoiding the weaknesses of the straight Metropolis-Hastings algorithm as well as those of importance sampling. In particular, the DSMH sampler possesses the capacity to cope with incredibly irregular distributions that are full ...
FRB Atlanta Working Paper , Paper 2014-21

Working Paper
Inflation and Real Activity over the Business Cycle
Bianchi, Francesco; Nicolo, Giovanni; Song, Dongho (2023-03)
We study the relation between inflation and real activity over the business cycle. We employ a Trend-Cycle VAR model to control for low-frequency movements in inflation, unemployment, and growth that are pervasive in the post-WWII period. We show that cyclical fluctuations of inflation are related to cyclical movements in real activity and unemployment, in line with what is implied by the New Keynesian framework. We then discuss the reasons for which our results relying on a Trend-Cycle VAR differ from the findings of previous studies based on VAR analysis. We explain empirically and ...
Finance and Economics Discussion Series , Paper 2023-038

Working Paper
Estimates of r* Consistent with a Supply-Side Structure and a Monetary Policy Rule for the U.S. Economy
Laforte, Jean-Philippe; Gonzalez-Astudillo, Manuel (2020-10-08)
We estimate the natural rate of interest (r*) using a semi-structural model of the U.S. economy that jointly characterizes the trend and cyclical factors of key macroeconomic variables such as output, the unemployment rate, inflation, and short- and long-term interest rates. We specify a monetary policy rule and an equation that characterizes the 10-year Treasury yield to exploit the information provided by both interest rates to infer r*. However, the use of a monetary policy rule with a sample that spans the Great Recession and its aftermath poses a challenge because of the effective lower ...
Finance and Economics Discussion Series , Paper 2020-085

Working Paper
Contagious Switching
Owyang, Michael T.; Soques, Daniel; Piger, Jeremy M. (2021-02-28)
We analyze the propagation of recessions across countries. We construct a model that allows for multiple qualitative state variables in a vector autoregression (VAR) setting. The VAR structure allows us to include country-level variables to determine whether policy also propagates across countries. We consider two different versions of the model. One version assumes the discrete state of the economy (expansion or recession) is observed. The other assumes that the state of the economy is unobserved and must be inferred from movements in economic growth. We apply the model to Canada, Mexico, ...
Working Papers , Paper 2019-014

Working Paper
Estimating Hysteresis Effects
Furlanetto, Francesco; Lepetit, Antoine; Robstad, Ørjan; Rubio-Ramirez, Juan F.; Ulvedal, Pål (2021-11-09)
In this paper, we identify demand shocks that can have a permanent effect on output through hysteresis effects. We call these shocks permanent demand shocks. They are found to be quantitatively important in the United States, in particular when the sample includes the Great Recession. Recessions driven by permanent demand shocks lead to a permanent decline in employment and investment, although output per worker is largely unaffected. We find strong evidence that hysteresis transmits through a rise in long-term unemployment and a decline in labor force participation and disproportionately ...
FRB Atlanta Working Paper , Paper 2021-24

Working Paper
Identifying Structural VARs with a Proxy Variable and a Test for a Weak Proxy
Lunsford, Kurt Graden (2015-12-04)
This paper develops a simple estimator to identify structural shocks in vector autoregressions (VARs) by using a proxy variable that is correlated with the structural shock of interest but uncorrelated with other structural shocks. When the proxy variable is weak, modeled as local to zero, the estimator is inconsistent and converges to a distribution. This limiting distribution is characterized, and the estimator is shown to be asymptotically biased when the proxy variable is weak. The F statistic from the projection of the proxy variable onto the VAR errors can be used to test for a weak ...
Working Papers (Old Series) , Paper 1528

Working Paper
A Counterfactual Economic Analysis of COVID-19 Using a Threshold Augmented Multi-Country Model
Chudik, Alexander; Mohaddes, Kamiar; Pesaran, M. Hashem; Raissi, Mehdi; Rebucci, Alessandro (2020-10-02)
This paper develops a threshold-augmented dynamic multi-country model (TG-VAR) to quantify the macroeconomic effects of COVID-19. We show that there exist threshold effects in the relationship between output growth and excess global volatility at individual country levels in a significant majority of advanced economies and in the case of several emerging markets. We then estimate a more general multi-country model augmented with these threshold effects as well as long-term interest rates, oil prices, exchange rates and equity returns to perform counterfactual analyses. We distinguish common ...
Globalization Institute Working Papers , Paper 402

Working Paper
Nowcasting Business Cycles: a Bayesian Approach to Dynamic Heterogeneous Factor Models
D'Agostino, Antonello; Giannone, Domenico; Lenza, Michele; Modugno, Michele (2015-08-06)
We develop a framework for measuring and monitoring business cycles in real time. Following a long tradition in macroeconometrics, inference is based on a variety of indicators of economic activity, treated as imperfect measures of an underlying index of business cycle conditions. We extend existing approaches by permitting for heterogenous lead-lag patterns of the various indicators along the business cycles. The framework is well suited for high-frequency monitoring of current economic conditions in real time - nowcasting - since inference can be conducted in presence of mixed frequency ...
Finance and Economics Discussion Series , Paper 2015-66

Working Paper
Common Factors, Trends, and Cycles in Large Datasets
Barigozzi, Matteo; Luciani, Matteo (2017-11-13)
This paper considers a non-stationary dynamic factor model for large datasets to disentangle long-run from short-run co-movements. We first propose a new Quasi Maximum Likelihood estimator of the model based on the Kalman Smoother and the Expectation Maximisation algorithm. The asymptotic properties of the estimator are discussed. Then, we show how to separate trends and cycles in the factors by mean of eigenanalysis of the estimated non-stationary factors. Finally, we employ our methodology on a panel of US quarterly macroeconomic indicators to estimate aggregate real output, or Gross ...
Finance and Economics Discussion Series , Paper 2017-111

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