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Research Interests: Economics, Econometrics, Vector Autoregression, Time Series Prediction, Error Analysis, and 11 moreDSGE Model, Output Gap, Inflation Cosmology, Indexation, Prediction Accuracy, Time Series Model, VAR model, Autoregressive model, sticky prices, Econometric Model, and Dynamic Stochastic General Equilibrium
Research Interests: Economics, Econometrics, Economic Theory, Applied Economics, Model Selection, and 11 moreImpulse response, Historical Data, DSGE Model, Output Gap, Inflation Cosmology, Indexation, Impulse Response Analysis, Price Stickiness, sticky prices, Finance and Investment Banking, and Dynamic Stochastic General Equilibrium
ABSTRACT Using a laboratory experiment, we investigate whether a variety of behaviors in repeated games are related to an array of individual characteristics that are popular in economics: risk attitude, time preference, trust,... more
ABSTRACT Using a laboratory experiment, we investigate whether a variety of behaviors in repeated games are related to an array of individual characteristics that are popular in economics: risk attitude, time preference, trust, trustworthiness, altruism, strategic skills in one-shot matrix games, compliance with first-order stochastic dominance, ability to plan ahead, and gender. We do find some systematic relationships. A subject’s compliance with first-order stochastic dominance as well as, possibly, patience, gender, and altruism have some systematic effects on her behavior in repeated games. At the level of a pair of subjects who are playing a repeated game, each subject’s gender as well as, possibly, patience and ability to choose an available dominant strategy in a one-shot matrix game systematically affect the frequency of the cooperate-cooperate outcome. However, overall, the number of systematic relationships is surprisingly small.
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Research Interests: Psychology and Loyalty
ABSTRACT In this paper we construct output gap and inflation predictions using a variety of DSGE sticky price models. Predictive density accuracy tests related to the test discussed in Corradi and Swanson (2005a) as well as predictive... more
ABSTRACT In this paper we construct output gap and inflation predictions using a variety of DSGE sticky price models. Predictive density accuracy tests related to the test discussed in Corradi and Swanson (2005a) as well as predictive accuracy tests due to Diebold and Mariano (1995) andWest (1996) are used to compare the alternative models. A number of simple time series prediction models (such as autoregressive and vector autoregressive (VAR) models) are additionally used as strawman models. Given that DSGE model restrictions are routinely nested within VAR models, the addition of our strawman models allows us to indirectly assess the usefulness of imposing theoretical restrictions implied by DSGE models on unrestricted econometric models. With respect to predictive density evaluation, our results suggest that the standard sticky price model discussed in Calvo (1983) is not outperformed by the same model augmented either with information or indexation, when used to predict the output gap. On the other hand, there are clear gains to using the more recent models when predicting inflation. Results based on mean square forecast error analysis are less clear-cut, although the standard sticky price model fares best at our longest forecast horizon of 3 years, and performs relatively poorly at shorter horizons. When the strawman time series models are added to the picture, we find that the DSGE models still fare very well, often winning our forecast competitions, suggesting that theoretical macroeconomic restrictions yield useful additional information for forming macroeconomic forecasts.
Research Interests: Economics, Econometrics, Model Selection, Vector Autoregression, Time Series Prediction, and 12 moreError Analysis, DSGE Model, Output Gap, Inflation Cosmology, Indexation, Prediction Accuracy, Time Series Model, VAR model, Autoregressive model, sticky prices, Econometric Model, and Dynamic Stochastic General Equilibrium
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... Oleg Korenok (okorenok@vcu.edu), VCU School of Business, 1015 Floyd Avenue, Richmond, VA 23284-4000 and Norman R. Swanson ... This paper has been prepared for the special issue on Information in Economic Forecasting co-edited by... more
... Oleg Korenok (okorenok@vcu.edu), VCU School of Business, 1015 Floyd Avenue, Richmond, VA 23284-4000 and Norman R. Swanson ... This paper has been prepared for the special issue on Information in Economic Forecasting co-edited by Michael Clements and David ...
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Research Interests: Economics, Microeconomics, Public Economics, Applied Economics, Crowding, and 7 moreDICTATOR GAME, Crowding Out, Dictator, Endowment, H, D, and C
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Experimental work in monetary economics is usually based on theory that incorporates an infinite horizon. Yet, hard constraints on laboratory sessions lead to finite times when the game must (with probability 1) end, and then simple... more
Experimental work in monetary economics is usually based on theory that incorporates an infinite horizon. Yet, hard constraints on laboratory sessions lead to finite times when the game must (with probability 1) end, and then simple backward induction implies monetary equilibria cannot exist. Hence, these experiments cannot evaluate subjects' ability to settle on the use of money as a medium of exchange, that ameliorates trading frictions, as an equilibrium outcome. To address this, we present some finite-horizon games where monetary exchange is an equilibrium outcome, and report some experimental results using these games.
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Scaling is common in empirical accounting research. It is often done to mitigate heteroscedasticity or the influence of firm size on parameter estimates. However, Barth and Clinch conclude that common diagnostic tools are ineffective in... more
Scaling is common in empirical accounting research. It is often done to mitigate heteroscedasticity or the influence of firm size on parameter estimates. However, Barth and Clinch conclude that common diagnostic tools are ineffective in detecting various scale effects. Using analytic results and Monte Carlo simulations, we show that common forms of scaling, when misapplied, induce substantial spurious correlation via biased parameter estimates. Researchers, when uncertain about the exact functional form of scale effect, are typically better off dealing with both heteroscedasticity and the influence of larger firms using techniques other than scaling.
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This file contains the experimental data reported in "Liquidity Requirements and the Interbank Loan Market" An Experimental Investigation" by Douglas Davis, Oleg Korenok, John Lightle and Edward S. Prescott. The EXCEL file... more
This file contains the experimental data reported in "Liquidity Requirements and the Interbank Loan Market" An Experimental Investigation" by Douglas Davis, Oleg Korenok, John Lightle and Edward S. Prescott. The EXCEL file consists of three pages. One page contains observations aggregated at the market level, a second page contains individual observations. The third page lists and explains the variable names used on the market and individual data pages.
Abstract Wage negotiation plays a central role in the dynamics of search and matching models. We explore the theoretical wage predictions of the canonical search and matching model of Diamond (1982) in laboratory bargaining experiments.... more
Abstract Wage negotiation plays a central role in the dynamics of search and matching models. We explore the theoretical wage predictions of the canonical search and matching model of Diamond (1982) in laboratory bargaining experiments. Overall, wages in the experiment are less responsive to changes in the market conditions than theory predicts. Wages respond to changes in unemployment insurance in the correct direction, yet the size of the response is about half of what theory predicts. On the other hand, contrary to theory, wages are unresponsive to changes in the level of unemployment. We also find that wages of new matches are more sensitive than wages of on-going matches, and that the duration of unemployment influences wages in certain settings.
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Research Interests: Economics, Macroeconomics, Economic Theory, Applied Economics, Parameter estimation, and 11 moreMonetary Policy, Model Selection, Imperfect information, Comparative modeling, Estimation Method, Structural model, Wage Setting, Bayesian Model Comparison, sticky prices, model comparison, and Money demand
Research Interests: Business, Economics, Rebranding, Multidisciplinary, Reliability, and 6 moreWorking Papers, Warranty, Market Share, New Products, M, and L
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Abstract: This paper evaluates the effects of some standard procedural variations on outcomes in posted offer oligopoly experiments. Variations studied include the presence or absence of market information, the use of re-matched or fixed... more
Abstract: This paper evaluates the effects of some standard procedural variations on outcomes in posted offer oligopoly experiments. Variations studied include the presence or absence of market information, the use of re-matched or fixed seller pairs and alterations in the order of sequencing. Experimental results indicate that such variations can have first order effects on outcomes. For this reason, we recommend that results in oligopoly experiments be carefully interpreted in light of the procedures selected.
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Abstract: We report a price-setting market experiment conducted to examine the capacity of price and information frictions to explain real responses to nominal price shocks. As predicted by the standard dynamic models of adjustment in... more
Abstract: We report a price-setting market experiment conducted to examine the capacity of price and information frictions to explain real responses to nominal price shocks. As predicted by the standard dynamic models of adjustment in monopolistically competitive markets, we find that both price and information frictions impede the response to a nominal shock. Results deviate from predictions, however, in that the observed adjustment delays far exceed predicted levels. We suggest that another factor -bounded rationality -exerts a predominating effect. A variant of the standard analysis in which a subset of agents price adaptively better organizes our results.
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We undertake a structural analysis of the Hasbrouck unobserved components and the Madhavan, Richardson, and Roomans microstructure models. We map carefully the relationship between the structural parameters and four alternative measures... more
We undertake a structural analysis of the Hasbrouck unobserved components and the Madhavan, Richardson, and Roomans microstructure models. We map carefully the relationship between the structural parameters and four alternative measures of price discovery: (1) Hasbrouck; (2) Harris-McInish-Wood; (3) deJong-Schotman; and (4) Yan-Zivot. We describe analytically problems with using each measure: negative information shares; non-uniqueness; and potential violations of market efficiency. Simulation evidence also describes fragile inferences about the uncertainty of share estimates, misleading implications about price discovery, and the pattern of price adjustment. In an application to the Nasdaq dual listing experiment in 2004, we fi nd that price discovery did not shift significantly towards the Nasdaq.
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The paper analyzes two questions: (i) the effect of a monetary policy shock on the business cycle and (ii) the extent to which a shift in a monetary policy affects the dynamics of business cycle. Unlike previous literature, to answer... more
The paper analyzes two questions: (i) the effect of a monetary policy shock on the business cycle and (ii) the extent to which a shift in a monetary policy affects the dynamics of business cycle. Unlike previous literature, to answer these questions, we measure cycle movements by calculating an index from a number of aggregate macroeconomic series via a dynamic factor model. We find that monetary policy shocks have a small but significant impact on persistent and transitory parts of the cycle. A systematic shift of monetary policy has a modest effect.
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There is now considerable evidence that business cycle variation in output and employment in the U.S. differs in expansions and contractions. We present nonparametric evidence that asymmetries are strongest in durable goods manufacturing.... more
There is now considerable evidence that business cycle variation in output and employment in the U.S. differs in expansions and contractions. We present nonparametric evidence that asymmetries are strongest in durable goods manufacturing. In a Markov switching framework, we find two leading indicators, consumer expectations and the term spread, act as important driving forces behind asymmetry. Cross sectional analysis, using firm level data, shows that plant and equipment expenditures, raw materials inventory holdings, and bankruptcy score increase the likelihood ratio index for asymmetry by more than 65%.
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We report a market experiment that examines the capacity of price and information frictions to explain real responses to nominal price shocks. As predicted by the standard dynamic adjustment models, we find that both price and information... more
We report a market experiment that examines the capacity of price and information frictions to explain real responses to nominal price shocks. As predicted by the standard dynamic adjustment models, we find that both price and information frictions impede the response to a nominal shock. We also find, however, that the observed adjustment delays far exceed predicted levels. Results of a pair of subsequent treatments indicate that a combination of announcing the shock privately to all sellers (rather than publicly) and a failure of many sellers to best respond to their expectations explains the observed adjustment inertia.
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Abstract Experimental work in monetary economics is usually based on theory that incorporates an infinite horizon. Yet, hard constraints on laboratory sessions lead to finite times when the game must (with probability 1) end, and then... more
Abstract Experimental work in monetary economics is usually based on theory that incorporates an infinite horizon. Yet, hard constraints on laboratory sessions lead to finite times when the game must (with probability 1) end, and then simple backward induction implies monetary equilibria cannot exist. Hence, these experiments cannot evaluate subjects’ ability to settle on the use of money as a medium of exchange, that ameliorates trading frictions, as an equilibrium outcome. To address this, we present some finite-horizon games where monetary exchange is an equilibrium outcome, and report some experimental results using these games.
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We conduct experiments designed to test whether earning the endowment increases the difference between giving and taking public good games. We find that neither the type of game nor the source of endowment affect cooperation rates.
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We use experimental methods to evaluate a simplified interbank market. The design is a laboratory adaptation of the analysis of interbank market fragility by Allen and Gale (J Eur Econ Assoc 2:1015–1048), and features symmetric banks who... more
We use experimental methods to evaluate a simplified interbank market. The design is a laboratory adaptation of the analysis of interbank market fragility by Allen and Gale (J Eur Econ Assoc 2:1015–1048), and features symmetric banks who allocate deposit endowments between cash and illiquid assets prior to the incidence of a shock. Following the shock liquidity-deficient banks trade assets for cash. Treatments include variations in the shock type, as well as alterations in the range of permissible asset prices. Consistent with Allen and Gale, we find that while interbank trading substantially increases investment activity, the markets are frequently characterized by price variability and a stochastic distribution of investment outcomes.
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... To incorporate the reference cycle into the monetary policy analysis, we adopt Bernanke, Boivin and Eliasz (2003) two-step approach. It combines a dynamic factor model with a ... (FF), log of total reserves (TR), log of non-borrowed... more
... To incorporate the reference cycle into the monetary policy analysis, we adopt Bernanke, Boivin and Eliasz (2003) two-step approach. It combines a dynamic factor model with a ... (FF), log of total reserves (TR), log of non-borrowed reserves (NBR), and log of monetary base (M0). ...