Author: Angela Martina FuestPublisher:
ISBN:
Category : Uncertainty
Languages : en
Pages :
Book Description
Empirical Essays on Expectations and Uncertainty in Macroeconomics
Author: Angela Martina FuestPublisher:
ISBN:
Category : Uncertainty
Languages : en
Pages :
Book Description
Empirical Essays on Uncertainty and Economic Behavior
Author: Paul JonesPublisher:
ISBN:
Category : Electronic dissertations
Languages : en
Pages : 85
Book Description
My dissertation looks at the new and growing field of macroeconomic uncertainty. It consists of three empirical essays on different measures of macroeconomic uncertainty and how uncertainty affects macroeconomic behavior. The first essay uses a new uncertainty index from Baker et al. (2012). We evaluate the time-varying correlation between macroeconomic uncertainty, inflation, and output. Estimation results from a multivariate DCC-GARCH model reveal that the sign of the correlation between macroeconomic uncertainty and inflation changed from negative to positive during the late 1990s, whereas the correlation between uncertainty and output is consistently negative. In the second essay, we propose domestic uncertainty shocks may serve as a channel through which business cycles are transmitted internationally. To quantify uncertainty, we use two measures from the current literature and estimate structural vector autoregressions to evaluate the effects U.S. uncertainty shocks have on the Japanese and British economies. Our results suggest U.S. uncertainty shocks have international effects consistent with a demand shock in the context of an open-economy IS/LM model with sticky prices. For the final essay we estimate a number of macroeconomic variables as logistic smooth transition autoregressive (LSTAR) processes with uncertainty as the transition variable. Nonlinear estimation allows us to answer several interesting questions left unanswered by a linear model. For a number of important macroeconomic variables, we show (i) a positive shock to uncertainty has a greater effect than a negative shock, and (ii) the effect of the uncertainty shock is highly dependent on the state of the economy. Hence, the usual linear estimates concerning the consequences of uncertainty are underestimated in circumstances such as the recent financial crisis.
Essays in Empirical Macroeconomics
Author: Julian Felix LudwigPublisher:
ISBN:
Category :
Languages : en
Pages : 274
Book Description
This dissertation examines how expectations are formed and how they interact with economic activities. Beliefs about economic outcomes vary with timing and accuracy of information, which have important implications for macroeconomic dynamics. The importance of expectations has long been emphasized in rational expectations (RE) models (see e.g. Lucas 1972, 1976; Kydland and Prescott 1982), and diffusion of information has been modeled in many ways (see e.g. Beaudry and Portier 2004, 2006; Mankiw and Reis 2002; Woodford 2003; Sims 2003). My work builds on this literature and aims to improve the understanding of information structure, formation of beliefs, and decision-making, and how they contribute to macro business cycles. In the first chapter, I point out how identification of full information rational expectations (FIRE) models suffers from Manski's (1993) reflection problem. I extend the standard rational expectations (RE) model to allow for a more general information structure and introduce a new framework to identify the generalized model with forecaster data. Identification is no longer subject to the reflection problem when two changes are made to the information structure: the addition of news shocks and imperfect information. News shocks provide additional variation in expectations about the future. Imperfect information provides changes in beliefs about past states, through which the feedback between expectations and decisions goes only in one direction. Expectations data are consistent with both. An application to Greenbook forecasts illustrates the importance of both news shocks and learning about the past. When I apply this framework to a Blanchard and Quah (1989) decomposition, I reach qualitatively new results. For example, expansionary supply shocks decrease unemployment. Supply shocks are also particularly subject to both news and information rigidities, so relaxing the information structure is key to correctly identifying these shocks. In the second chapter, I discover how both good and bad news shocks coincide with higher uncertainty on impact. This new stylized fact is robust to different empirical models of the news shocks literature and different proxies for U.S. macro uncertainty. The new stylized fact has implications in three fields. First, bad news shocks produce the dynamics discovered in the uncertainty literature: spikes in uncertainty are followed by drops in output. I show that there is indeed some overlap between bad news and uncertainty shocks, as the effect of an uncertainty shock gets weaker when controlling for bad news shocks. Second, I show that the close relationship between news shocks and uncertainty seems to be also responsible for the close relationship between quarterly stock returns and stock market volatility - a proxy for uncertainty. This contributes to the finance literature that works on this relationship. Third, introducing a non-linear empirical model, I find additional asymmetries in the responses to news shocks due to the asymmetric response of uncertainty. This contributes directly to the news shocks literature. An important conclusion of chapters one and two is that economic shocks vary with availability of information. The third chapter deals with such heterogeneity. I relax the assumption that economic shocks of the same type are homogeneous, respectively, always have the same effect. Instead, I argue that economists identify a shock that consists of a variety of heterogeneous components. For example, a technology shock is the sum of all disaggregate technology shocks, from innovations in marketing up to inventions in the manufacturing process, which all have different effects on the economy. I discuss how standard identification methods can identify the shocks of interest despite this heterogeneity. I find that the weights on the shock components depend on the identification strategy so that different identification strategies produce different effects. This could explain why different macro papers often identify different responses to the same shock, in the same country, and over the same time period
Essays on Model Uncertainty in Macroeconomics
Author: Mingjun ZhaoPublisher:
ISBN:
Category : Bayesian statistical decision theory
Languages : en
Pages : 76
Book Description
Abstract: My dissertation grapples with the issues of model uncertainty in macroeconomics, and analyzes its consequences for monetary policy. It consists of three essays. In the first essay (Chapter 1), "Monetary Policy under Misspecified Expectations", I examine policy choices for the central bank that faces uncertainty about the process of expectation formation by economic agents. The economy contains both "rule-of-thumb" agents who base their expectations on recent observations and agents who have rational expectations. The central bank is uncertain about the fraction of the rule-of-thumb agents. This uncertainty concern enables me to partially rationalize the over cautious policy stance of the Fed: empirically observed policy in the past two decades involves much weaker responses than optimal policies derived from various micro-founded models. It is well understood that when the economy is more forward-looking, the central bank displays more aggressive responses to inflation and output. But the uncertainty-averse central bank evaluates policies by the performance in the worst case. In my economy this has a high fraction of agents that are backward-looking. The best policy the central bank chooses thus involves moderate responses. That is to say, this minimax policy moves closer toward actual less responsive policy. In the second essay (Chapter 2), "Phillips Curve Uncertainty and Monetary Policy", I investigate the effect of model uncertainty on policy choices employing a more general approach, which nests the minimax and Bayesian approaches as limiting cases. The central bank is uncertain about whether the economy has a sticky price Phillips curve or a sticky information Phillips curve. I argue that how the central bank chooses a policy depends both on its perception of uncertainty environment and on its attitude towards uncertainty. I find that as the central bank either becomes more uncertainty-averse or considers sticky information more plausible, the response to inflation decreases and to output increases. The third essay (Chapter 3) is entitled "Optimal Simple Rules in RE Models with Risk Sensitive Preferences". This paper provides a useful method to solve optimal simple rules under risk sensitive preference in macro models with forward looking behavior. An application to a new Keynesian model with lagged dynamics is offered and risk sensitive preference is found to amplify policy responses.
Essays in Empirical Economics
Author: Rasmus Pank RoulundPublisher:
ISBN:
Category : Rational expectations (Economic theory)
Languages : en
Pages : 108
Book Description
This first chapter is co-authored with Nicolás Aragón and examines how participant and market confidence affect the outcomes in an experimental asset market where the fundamental value is known by all participants. Such a market should, in theory, clear at the expected value in each period. However, the literature has shown that bubbles often occur in these markets. We measure the confidence of each participant by asking them to forecast the one-period-ahead price as a discrete probability mass distribution. We find that confidence not only affects price-formation in markets, but is important in explaining the dynamics of bubbles. Moreover, as traders’ confidence grows, they become increasingly more optimistic, thus increasing the likelihood of price bubbles. The second chapter also deals with expectations and uncertainty, but from a different angle. It asks how increased uncertainty affects economic demand in a particular sector, using a discrete-choice demand framework. To investigate this issue I examine empirically to what extent varying uncertainty affects the consumer demand for flight traffic using us micro demand data. I find that the elasticity of uncertainty on demand is economically and statistically significant. The third chapter presents a more practical side to the issue examined in the first chapter. It describes how to elicit participants’ expectations in an economic experiment. The methodology is based on Harrison et al. (2017). The tool makes it easier for participants in economic experiments to forecast the movements of a key variable as discrete values using a discrete probability mass distribution that can be “drawn” on a virtual canvas using the mouse. The module I wrote is general enough that it can be included in other economic experiments.
Uncertainty and Expectations in Economics
Author: Uncertainty, Expectations and Asset Price Dynamics
Author: Fredj JawadiPublisher: Springer
ISBN: 3319987143
Category : Business & Economics
Languages : en
Pages : 214
Book Description
Written in honor of Emeritus Professor Georges Prat (University of Paris Nanterre, France), this book includes contributions from eminent authors on a range of topics that are of interest to researchers and graduates, as well as investors and portfolio managers. The topics discussed include the effects of information and transaction costs on informational and allocative market efficiency, bubbles and stock price dynamics, paradox of rational expectations and the principle of limited information, uncertainty and expectation hypotheses, oil price dynamics, and nonlinearity in asset price dynamics.
Empirical Macroeconomics and Statistical Uncertainty
Author: Mateusz PipieńPublisher: Routledge
ISBN: 1000170845
Category : Business & Economics
Languages : en
Pages : 121
Book Description
This book addresses one of the most important research activities in empirical macroeconomics. It provides a course of advanced but intuitive methods and tools enabling the spatial and temporal disaggregation of basic macroeconomic variables and the assessment of the statistical uncertainty of the outcomes of disaggregation. The empirical analysis focuses mainly on GDP and its growth in the context of Poland. However, all of the methods discussed can be easily applied to other countries. The approach used in the book views spatial and temporal disaggregation as a special case of the estimation of missing observations (a topic on missing data analysis). The book presents an econometric course of models of Seemingly Unrelated Regression Equations (SURE). The main advantage of using the SURE specification is to tackle the presented research problem so that it allows for the heterogeneity of the parameters describing relations between macroeconomic indicators. The book contains model specification, as well as descriptions of stochastic assumptions and resulting procedures of estimation and testing. The method also addresses uncertainty in the estimates produced. All of the necessary tests and assumptions are presented in detail. The results are designed to serve as a source of invaluable information making regional analyses more convenient and – more importantly – comparable. It will create a solid basis for making conclusions and recommendations concerning regional economic policy in Poland, particularly regarding the assessment of the economic situation. This is essential reading for academics, researchers, and economists with regional analysis as their field of expertise, as well as central bankers and policymakers.
Surveys in the Economics of Uncertainty
Author: John Denis HeyPublisher: Wiley-Blackwell
ISBN: 9780631168911
Category : Economics
Languages : en
Pages : 232
Book Description
Handbook of Economic Expectations
Author: Ruediger BachmannPublisher: Elsevier
ISBN: 0128234768
Category : Business & Economics
Languages : en
Pages : 876
Book Description
Handbook of Economic Expectations discusses the state-of-the-art in the collection, study and use of expectations data in economics, including the modelling of expectations formation and updating, as well as open questions and directions for future research. The book spans a broad range of fields, approaches and applications using data on subjective expectations that allows us to make progress on fundamental questions around the formation and updating of expectations by economic agents and their information sets. The information included will help us study heterogeneity and potential biases in expectations and analyze impacts on behavior and decision-making under uncertainty. Combines information about the creation of economic expectations and their theories, applications and likely futures Provides a comprehensive summary of economics expectations literature Explores empirical and theoretical dimensions of expectations and their relevance to a wide array of subfields in economics