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Articles 1 - 30 of 43
Full-Text Articles in Social and Behavioral Sciences
Hyper-Consistent Estimation Of A Unit Root In Time Series Regression, Peter C.B. Phillips
Hyper-Consistent Estimation Of A Unit Root In Time Series Regression, Peter C.B. Phillips
Cowles Foundation Discussion Papers
It is shown that the fully modified ordinary least squares (FM-OLS) estimator of a unit root in time series regression is T 3 /2 -consistent. Relative to FM-OLS, therefore, the least squares and maximum likelihood estimators are infinitely deficient asymptotically. Simulations show that this dominance of FM-OLS persists even in small samples.
An Alternative Theory Of Firm And Industry Dynamics, Richard Ericson, Ariel Pakes
An Alternative Theory Of Firm And Industry Dynamics, Richard Ericson, Ariel Pakes
Cowles Foundation Discussion Papers
This paper provides a model of firm and industry dynamics that allows for entry, exit and firm-specific uncertainty generating variability in the fortunes of firms. It focuses on the impact of uncertainty arising from investment in research and exploration-type processes. It analyzes the behavior of individual firms exploring profit opportunities in an evolving marketplace and derives optimal policies, including exit, in this environment. Then it adds an entry process and aggregates the optimal behavior of all firms, including potential entrants, into a rational expectations, Markov perfect industry equilibrium, and proves ergodicity of the equilibrium process. Numerical examples are used to …
Measuring Asset Values For Cash Settlement In Derivative Markets: Hedonic Repeated Measures Indices And Perpetual Futures, Robert J. Shiller
Measuring Asset Values For Cash Settlement In Derivative Markets: Hedonic Repeated Measures Indices And Perpetual Futures, Robert J. Shiller
Cowles Foundation Discussion Papers
Two proposals are made that may facilitate the creation of derivative market instruments, such as futures contracts, cash-settled based on economic indices. The first proposal concerns index number construction: indices based on infrequent measurements of nonstandardized items may control for quality change by using a hedonic repeated measures method, an index number construction method that follows individual assets or subjects through time and also takes account of measured quality variables. The second proposal is to establish markets for perpetual claims on cash flows matching indices of dividends or rents. Such markets may help us to measure the prices of the …
Some Dynamics Of A Strategic Market Game With A Large Number Of Agents, John M. Miller, Martin Shubik
Some Dynamics Of A Strategic Market Game With A Large Number Of Agents, John M. Miller, Martin Shubik
Cowles Foundation Discussion Papers
This paper is designed to combine the game theoretic investigation of the static or equilibrium properties of large strategic market games together with the investigation of some very simple dynamics, which nevertheless are sufficient to show differences between two related games, one in which both borrowing and trade take place. The role of banking reserves emerges as relevant and sensitive to the transient state dynamics. Several 100,000 player games are simulated and the behavior is constructed with the analytical prediction for the games with a continuum of agents.
The Complex Of Maximal Lattice Free Simplices, Imre Bárány, Roger Howe, Herbert E. Scarf
The Complex Of Maximal Lattice Free Simplices, Imre Bárány, Roger Howe, Herbert E. Scarf
Cowles Foundation Discussion Papers
The simplicial complex K ( A ) is defined to be the collection of simplices, and their proper subsimplices, representing maximal lattice free bodies of the form { x : Ax < b }, with A a fixed ( n + 1) × n matrix. The topological space associated with K ( A ) is shown to be homeomorphic to R n , and the space obtained by identifying lattice translates of these simplices is homeomorphic to the n -torus.
The Large Sample Correspondence Between Classical Hypothesis Tests And Bayesian Posterior Odds Tests, Donald W.K. Andrews
The Large Sample Correspondence Between Classical Hypothesis Tests And Bayesian Posterior Odds Tests, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper establishes a correspondence in large samples between classical hypothesis tests and Bayesian posterior odds tests for models without trends. More specifically, tests of point null hypotheses and one- or two-sided alternatives are considered (where nuisance parameters may be present under both hypotheses). It is shown that for certain priors the Bayesian posterior odds test is equivalent in large samples to classical Wald, Lagrange multiplier, and likelihood ratio tests for some significance level and vice versa.
Some Exact Distribution Theory For Maximum Likelihood Estimators Of Cointegrating Coefficients In Error Correction Models, Peter C.B. Phillips
Some Exact Distribution Theory For Maximum Likelihood Estimators Of Cointegrating Coefficients In Error Correction Models, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper derives some exact finite sample distributions and characterizes the tail behavior of maximum likelihood estimators of the cointegrating coefficients in error correction models. It is shown that the reduced rank regression estimator has a distribution with Cauchy-like tails and no finite moments of integer order. The maximum likelihood estimator of the coefficients in a particular triangular system representation is studied and shown to have matrix t -distribution tails with finite integer moments to order T - n + r where T is the sample size, n is the total number of variables in the system and r is …
Nota Bene; Volume Vi, Number Iii, Yale University Library
Nota Bene; Volume Vi, Number Iii, Yale University Library
Nota Bene
Nota Bene is published during the academic year to acquaint the Yale community and others with the resources of the Yale Library.
Construction Of Stationary Markov Equilibria In A Strategic Market Game, Ioannis Karatzas, Martin Shubik, William D. Sudderth
Construction Of Stationary Markov Equilibria In A Strategic Market Game, Ioannis Karatzas, Martin Shubik, William D. Sudderth
Cowles Foundation Discussion Papers
This paper studies stationary noncooperative equilibria in an economy with fiat money , one nondurable commodity , countably many time periods, no credit or futures market, and a measure space of agents — who may differ in their preferences and in the distributions of their (random) endowments. These agents are immortal, and hold fiat money as a means of hedging against the random fluctuations in their endowments of the commodity. In the aggregate, these fluctuations offset each other, and equilibrium prices are constant. We carry out an equilibrium analysis that focuses on distribution of wealth, on consumption, and on price …
Time Series Modeling With A Bayesian Frame Of Reference: Concepts, Illustrations And Asymptotics, Peter C.B. Phillips, Werner Ploberger
Time Series Modeling With A Bayesian Frame Of Reference: Concepts, Illustrations And Asymptotics, Peter C.B. Phillips, Werner Ploberger
Cowles Foundation Discussion Papers
This paper offers an approach to time series modeling that attempts to reconcile classical and Bayesian methods. The central idea put forward to achieve this reconciliation is that the Bayesian approach relies implicitly on a frame of reference for the data generating mechanism that is quite different from the one that is employed in the classical approach. Differences in inferences from the two approaches are therefore to be expected unless the altered frame of reference is taken into account. We show that the new frame of reference in Bayesian inference is a consequence of a change of measure that arises …
Poverty In Relation To Macroeconomic Trends, Cycles, And Policies, James Tobin
Poverty In Relation To Macroeconomic Trends, Cycles, And Policies, James Tobin
Cowles Foundation Discussion Papers
This survey concludes that general prosperity and economic growth have been considerably less powerful engines of progress against poverty in the U.S. than they were before 1973. Macroeconomic performance has deteriorated, and its relation to poverty has weakened too. It is shown that the incidence of poverty can be fairly well explained by regressions on unemployment rates and real wages, both in national time series and in state cross-sections. Recent downward deviations from these regressions appear to reflect structural labor market changes that make poverty less treatable by macro medicine.
Is Gold An Efficient Store Of Value?, Pradeep Dubey, John Geanakoplos, Martin Shubik
Is Gold An Efficient Store Of Value?, Pradeep Dubey, John Geanakoplos, Martin Shubik
Cowles Foundation Discussion Papers
Gold and tobacco have both been used as money. One difference between the two is that gold yields utility, on account of its beauty, without diminishing its quantity. Tobacco yields utility when it is consumed. If this were the only difference, which would be the better money?
Tjalling Charles Koopmans (August 28, 1910–February 26, 1985), Herbert E. Scarf
Tjalling Charles Koopmans (August 28, 1910–February 26, 1985), Herbert E. Scarf
Cowles Foundation Discussion Papers
Tjalling C. Koopmans made fundamental contributions to economics. This paper, prepared for a National Academy of Sciences volume of memoirs, provides a biographical sketch of this extraordinary individual.
Bayes Models And Forecasts Of Australian Macroeconomic Time Series, Peter C.B. Phillips
Bayes Models And Forecasts Of Australian Macroeconomic Time Series, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper provides an empirical implementation of some recent work by the author and Werner Ploberger on the development of “Bayes models” for time series. The methods offer a new data-based approach to model selection, to hypothesis testing and to forecast evaluation in the analysis of time series. A particular advantage of the approach is that modelling issues such as lag order, parameter constancy, and the presence of deterministic and stochastic trends all come within the compass of the same statistical methodology, as do the evaluation of forecasts from competing models. The paper shows how to build parsimonious empirical “Bayes …
Bayes Methods For Trending Multiple Time Series With An Empirical Application To The Us Economy, Peter C.B. Phillips
Bayes Methods For Trending Multiple Time Series With An Empirical Application To The Us Economy, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Multiple time series models with stochastic regressors are considered and primary attention is given to vector autoregressions (VAR’s) with trending mechanisms that may be stochastic, deterministic or both. In a Bayesian framework, the data density in such a system implies the existence of a time series “Bayes model” and “Bayes measure” of the data. These are predictive models and measures for the next period observation given the historical trajectory to the present. Issues of model selection, hypothesis testing and forecast evaluation are all studied within the context of these models and the measures are used to develop selection criteria, test …
Approximately Median-Unbiased Estimation Of Autoregressive Models With Applications To U.S. Macroeconomic And Financial Time Series, Donald W.K. Andrews, Hong-Yuan Chen
Approximately Median-Unbiased Estimation Of Autoregressive Models With Applications To U.S. Macroeconomic And Financial Time Series, Donald W.K. Andrews, Hong-Yuan Chen
Cowles Foundation Discussion Papers
This paper introduces approximately median-unbiased estimators for univariate AR( p ) models with time trends. Confidence intervals also are considered. The methods are applied to the Nelson–Plosser macroeconomic data series, the extended Nelson–Plosser macroeconomic data series, and some annual stock dividend and price series. The results show that most of the series exhibit substantially greater persistence than least squares estimates and some Bayesian estimates suggest. For example, for the extended Nelson–Plosser data set, eight of the fourteen series are estimated to have a unit root, while six are estimated to be trend stationary. In contrast, the least squares estimates indicate …
On The Periodic Structure Of The Business Cycle, Eric Ghysels
On The Periodic Structure Of The Business Cycle, Eric Ghysels
Cowles Foundation Discussion Papers
In this paper, we test whether a regime shift from expansion to recession and vice versa is, ceteris paribus , equally likely throughout the year. If not, then it may, for instance, be less likely to get out of a recession in the middle of the winter than it is, say, in the spring or summer. We make use of Markov switching regime models to test the hypothesis of interest. The evidence is based on the conventional NBER business cycle chronology as well as alternatives to it. We find that recessions exhibit a periodic pattern in their switching regime transition …
Bayesian Model Selection And Prediction With Empirical Applications, Peter C.B. Phillips
Bayesian Model Selection And Prediction With Empirical Applications, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper builds on some recent work by the author and Werner Ploberger (1991, 1994) on the development of “Bayes models” for time series and on the authors’ model selection criterion “PIC.” The PIC criterion is used in this paper to determine the lag order, the trend degree, and the presence or absence of a unit root in an autoregression with deterministic trend. A new forecast encompassing test for Bayes models is developed which allows one Bayes model to be compared with another on the basis of their respective forecasting performance. The paper reports an extended empirical application of the …
Rolling The ‘Dice’: An Optimal Transition Path For Controlling Greenhouse Gases, William D. Nordhaus
Rolling The ‘Dice’: An Optimal Transition Path For Controlling Greenhouse Gases, William D. Nordhaus
Cowles Foundation Discussion Papers
The possibility of greenhouse warming has received growing attention in recent years. Many scientific bodies are calling for severe curbs on the emissions of greenhouse gases. To date, the calls to arms and treaty negotiations have progressed more or less independently of economic studies of the costs and benefits of measures to slow greenhouse warming. The plan of the present study is to develop a dynamic, global model of both the impacts of and policies to slow global warming. It is an integral model that incorporates both the dynamics of emissions and impacts and the economic costs of policies to …
Expectations Driven Nonlinear Business Cycles, Jean-Michel Grandmont
Expectations Driven Nonlinear Business Cycles, Jean-Michel Grandmont
Cowles Foundation Discussion Papers
The first part of the paper is a brief introduction to the concepts and methods used in recent endogenous business cycles models. Endogenous deterministic and stochastic fluctuations are bound to occur, under increasingly plausible assumptions, in models with individual optimization, market clearing and self-fulfilling expectations when there are capital market imperfections. The phenomenon is most likely to be observed, in a nonlinear framework, when some eigenvalue(s) of the system have a modulus close to 1 (unit roots). It is argued that endogenous business cycles models have become more and more credible alternatives to describe observed fluctuations in our economies. The …
A Nine Variable Probabilistic Macroeconomic Forecasting Model, Christopher A. Sims
A Nine Variable Probabilistic Macroeconomic Forecasting Model, Christopher A. Sims
Cowles Foundation Discussion Papers
A model for U.S. macroeconomic time series that has been used for forecasting for several years is described in some detail. The model is a multivariate Bayesian autoregression, with allowance for conditional heteroskedasticity, stochastic time-variation in parameters, and non-normality of disturbances. It specifies the prior distribution in ways that improve on previous Bayesian vector autoregression specifications in realism and forecasting performance. The model’s record of forecasting in recent years is displayed and discussed.
Yale Political Monthly 1992 May, The Politic, Inc.
Posterior Odds Testing For A Unit Root With Data-Based Model Selection, Peter C.B. Phillips, Werner Ploberger
Posterior Odds Testing For A Unit Root With Data-Based Model Selection, Peter C.B. Phillips, Werner Ploberger
Cowles Foundation Discussion Papers
The Kalman filter is sued to derive updating equations for the Bayesian data density in discrete time linear regression models with stochastic regressors. The implied “Bayes model” has time varying parameters and conditionally heterogeneous error variances. A sigma-finite “Bayes model” measure is given and used to produce a new model selection criterion (PIC) and objective posterior odds tests for sharp null hypotheses like the presence of a unit root. Simulation results and an empirical application are reported. The simulations show that the new model selection criterion “PIC” works very well and is generally superior to the Schwarz criterion BIC even …
A Note On The Dual Approach To The Existence And Characterization Of Optimal Consumption Decisions Under Uncertainty And Liquidity Constraints, Vassilis A. Hajivassiliou, Yannis M. Ioannides
A Note On The Dual Approach To The Existence And Characterization Of Optimal Consumption Decisions Under Uncertainty And Liquidity Constraints, Vassilis A. Hajivassiliou, Yannis M. Ioannides
Cowles Foundation Discussion Papers
This paper considers a dual approach to the problem of maximizing lifetime utility subject to liquidity constraints in a discrete time setting. These constraints prohibit the decision maker from borrowing against future endowment income. The dual approach allows us to exploit directly the supermartingale property of the marginal utility of expenditure and to establish existence and uniqueness of the optimal solution. The optimal solution is interpreted as deriving from a version of the problem that is subject to a single lifetime budget constraint, where expenditures and incomes are discounted to the beginning of the horizon by means of individualized Arrow-Debreu …
An Introduction To Econometric Random Variables, Donald W.K. Andrews
An Introduction To Econometric Random Variables, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper discusses some uses econometrics of functional limit theory for dependent random variables. Attention is focused on empirical process-type results rather than partial sum results that are prevalent in unit root econometrics. Examples considered include nonstandard parametric hypotheses tests and semiparametric estimation. The application of bracketing functional limit results is discussed in some detail.
Simulation Of Multivariate Normal Orthant Probabilities: Theoretical And Computational Results, Vassilis A. Hajivassiliou, Daniel Mcfadden, Paul A. Ruud
Simulation Of Multivariate Normal Orthant Probabilities: Theoretical And Computational Results, Vassilis A. Hajivassiliou, Daniel Mcfadden, Paul A. Ruud
Cowles Foundation Discussion Papers
An extensive literature in econometrics and in numerical analysis has considered the problem of evaluating the multiple integral P ( B ; µ, Ω) = Integral a b n ( v - µ, Ω) dv = E V 1 ( V c B ), where V is a m -dimensional normal vector with mean µ, covariance matrix Ω, and density n ( v - µ, Ω) and 1 ( V c B ) is an indicator for the event B = { V | a < V < b }. A leading case of such an integral is the negative orthant probability, where B = { v | v < 0}. The problem is computationally difficult except in very special cases. The multinomial probit (MNP) model used in econometrics and biometrics has cell probabilities that are negative orthant probabilities, with µ and depending on unknown parameters (and, in general, on covariates). Estimation of this model requires, for each trial parameter vector and each observation in a sample, evaluation of P (µ; B ) and of its derivatives with respect to µ and Ω. This paper surveys Monte Carlo techniques that have been developed for approximations of P (µ;Ω) and its linear and logarithmic derivatives that limit computation while possessing properties that facilitate their use in iterative calculations for statistical inference: the Crude Frequency Simulator (CFS), Normal Importance Sampling (NIS), a Kernel-Smoothed Frequency Simulator (KFS), Stern’s Decomposition Simulator (SDS), the Geweke–Hajivassiliou–Keane Simulator (GHK), a Parabolic Cylinder Function Simulator (PCF), Deák’s Chi-squared Simulator (DCS), an Acceptance/Rejection Simulator (ARS), the Gibbs Sampler Simulator (GSS), a Sequentially Unbiased Simulator (SUS), and an Approximately Unbiased Simulator (AUS). We also discuss Gauss and FORTRAN implementations of these algorithms and present our computational experience with them. We find that GHK is overall the most reliable method.
Christmas, Spring And The Dawning Of Economic Recovery, Eric Ghysels
Christmas, Spring And The Dawning Of Economic Recovery, Eric Ghysels
Cowles Foundation Discussion Papers
Six months of the year, which for convenience we call the spring and Christmas seasons, have a statistically higher number of troughs than the other six months of the year. In contrast, peaks do not exhibit any clustering. These results are drawn from the NBER chronology as well as alternative chronologies. As peaks are evenly distributed and troughs are not, it also appears that contraction lengths following peaks in the off-season are longer which is also an indication of the uneven propensity to switch regime throughout the year. This paper deliberately takes a “model-free” and “distribution-free” approach to test and …
Nota Bene; Volume Vi, Number Ii, Yale University Library
Nota Bene; Volume Vi, Number Ii, Yale University Library
Nota Bene
Nota Bene is published during the academic year to acquaint the Yale community and others with the resources of the Yale Library.
Optimal Tests When A Nuisance Parameter Is Present Only Under The Alternative, Donald W.K. Andrews, Werner Ploberger
Optimal Tests When A Nuisance Parameter Is Present Only Under The Alternative, Donald W.K. Andrews, Werner Ploberger
Cowles Foundation Discussion Papers
This paper derives asymptotically optimal tests for testing problems in which a nuisance parameter exists under the alternative hypothesis but not under the null. The results of the paper are of interest, because the testing problem considered in non-standard and the classical asymptotic optimality results for the Wald, Lagrange multiplier (LM), and likelihood ratio (LR) tests do not apply. In the non-standard cases of main interest, new optimal tests are obtained and the LR test is not found to be an optimal test.
Optimal Changepoint Tests For Normal Linear Regression, Donald W.K. Andrews, Inpyo Lee, Werner Ploberger
Optimal Changepoint Tests For Normal Linear Regression, Donald W.K. Andrews, Inpyo Lee, Werner Ploberger
Cowles Foundation Discussion Papers
This paper determines a class of finite sample optimal tests for the existence of a changepoint at an unknown time in a normal linear multiple regression model with known variance. Optimal tests for multiple changepoints are also derived. Power comparisons of several tests are provided based on simulations.