risks in the US had shifted in favor of deflation", similar concerns raised by an IMF Report... more risks in the US had shifted in favor of deflation", similar concerns raised by an IMF Report on Deflation (2003) over the risk of deflation in Europe, especially Germany and Switzerland, and the experience of declining price levels in China and Japan has sparked
Any opinions expressed here are those of the author(s) and not those of the institute. Research d... more Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper shou...
Any opinions expressed here are those of the author(s) and not those of IZA. Research published i... more Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to enco...
This paper develops a method that uses a likelihood approach to directly compare two or more non-... more This paper develops a method that uses a likelihood approach to directly compare two or more non-nested dynamic, stochastic general equilibrium (DSGE) models. It is shown how DSGE models can be compared across the whole sample and how this measure can be decomposed across individual observations thus allowing models to be compared across any sub-sample of the data. The method is applied to the problem of determining whether the technology shock process in a standard Real Business Cycle model should consist of permanent or temporary, albeit persistent, shocks. Overall, a permanent shock model has a better prediction performance than the temporary shock model. However, the model with the temporary shock performs much better for the part of the sample that includes the most of the 1980's and the 1990's.
Historically, episodes of rapid growth are accompanied by significant structural change. In this ... more Historically, episodes of rapid growth are accompanied by significant structural change. In this paper we therefore aim to quantify the extent to which factor accumulation induces structural change and productivity growth in industrializing economies. We present an extension of a standard growth model that incorporates two sectors, traditional and modern, and an endogenous wage gap, due to efficiency wages. We quantify the model using a panel of 78 countries over the post war era. The results show that these labour reallocation effects are significant and can increase the effective return to physical capital by around 30% in many countries.
Inference on the long-run properties of a Vector Autoregression (VAR) consisting wholly of I(1) v... more Inference on the long-run properties of a Vector Autoregression (VAR) consisting wholly of I(1) variables are made using Bayesian methods. In particular, the implications on the forecast and impulse response function distributions of directly estimating and restricting the drift parameters of variables in a VAR are studied. It is found that the forecast and impulse response distributions are sensitive to the prior distribution placed over the drift parameters.
The views expressed herein are those of the authors and do not necessarily reflect the views of t... more The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
We present a new monthly index of the yields on junk bonds (high risk, high yield bonds) for the ... more We present a new monthly index of the yields on junk bonds (high risk, high yield bonds) for the period 1910–1955. This index supplements the indexes of government bond yields, and Aaa and Baa corporate bond yields economic historians have relied on previously to describe the long-term risk spectrum. First, we describe our sources and methods. Then we show that our junk bond index contains information that is not in the closest alternative, and suggest some ways that the junk bond index could be used to enrich our understanding of the turbulent middle years of the twentieth century.
This paper uses a structural vector autoregression model to analyse the relationship between migr... more This paper uses a structural vector autoregression model to analyse the relationship between migration flows, housing construction and house prices in New Zealand. It shows that a net immigration flow equal to one percent of the population is associated with an approximately 10 percent increase in house prices. This size of this relationship, which has existed since the 1960s, is an order of magnitude larger than would be expected from the average change in the population and house prices in the long term. One explanation is that migration flows occur at times when locals are changing their demand for housing because of revised expectations about future income growth. A second explanation is that migrant flows have a destabilising effect on agents expectations about the fundamental value of houses. While the paper cannot satisfactorily distinguish between these two options, the results suggest that monetary policy can still be used to dampen the house price changes that occur at tim...
risks in the US had shifted in favor of deflation", similar concerns raised by an IMF Report... more risks in the US had shifted in favor of deflation", similar concerns raised by an IMF Report on Deflation (2003) over the risk of deflation in Europe, especially Germany and Switzerland, and the experience of declining price levels in China and Japan has sparked
Any opinions expressed here are those of the author(s) and not those of the institute. Research d... more Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper shou...
Any opinions expressed here are those of the author(s) and not those of IZA. Research published i... more Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to enco...
This paper develops a method that uses a likelihood approach to directly compare two or more non-... more This paper develops a method that uses a likelihood approach to directly compare two or more non-nested dynamic, stochastic general equilibrium (DSGE) models. It is shown how DSGE models can be compared across the whole sample and how this measure can be decomposed across individual observations thus allowing models to be compared across any sub-sample of the data. The method is applied to the problem of determining whether the technology shock process in a standard Real Business Cycle model should consist of permanent or temporary, albeit persistent, shocks. Overall, a permanent shock model has a better prediction performance than the temporary shock model. However, the model with the temporary shock performs much better for the part of the sample that includes the most of the 1980's and the 1990's.
Historically, episodes of rapid growth are accompanied by significant structural change. In this ... more Historically, episodes of rapid growth are accompanied by significant structural change. In this paper we therefore aim to quantify the extent to which factor accumulation induces structural change and productivity growth in industrializing economies. We present an extension of a standard growth model that incorporates two sectors, traditional and modern, and an endogenous wage gap, due to efficiency wages. We quantify the model using a panel of 78 countries over the post war era. The results show that these labour reallocation effects are significant and can increase the effective return to physical capital by around 30% in many countries.
Inference on the long-run properties of a Vector Autoregression (VAR) consisting wholly of I(1) v... more Inference on the long-run properties of a Vector Autoregression (VAR) consisting wholly of I(1) variables are made using Bayesian methods. In particular, the implications on the forecast and impulse response function distributions of directly estimating and restricting the drift parameters of variables in a VAR are studied. It is found that the forecast and impulse response distributions are sensitive to the prior distribution placed over the drift parameters.
The views expressed herein are those of the authors and do not necessarily reflect the views of t... more The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
We present a new monthly index of the yields on junk bonds (high risk, high yield bonds) for the ... more We present a new monthly index of the yields on junk bonds (high risk, high yield bonds) for the period 1910–1955. This index supplements the indexes of government bond yields, and Aaa and Baa corporate bond yields economic historians have relied on previously to describe the long-term risk spectrum. First, we describe our sources and methods. Then we show that our junk bond index contains information that is not in the closest alternative, and suggest some ways that the junk bond index could be used to enrich our understanding of the turbulent middle years of the twentieth century.
This paper uses a structural vector autoregression model to analyse the relationship between migr... more This paper uses a structural vector autoregression model to analyse the relationship between migration flows, housing construction and house prices in New Zealand. It shows that a net immigration flow equal to one percent of the population is associated with an approximately 10 percent increase in house prices. This size of this relationship, which has existed since the 1960s, is an order of magnitude larger than would be expected from the average change in the population and house prices in the long term. One explanation is that migration flows occur at times when locals are changing their demand for housing because of revised expectations about future income growth. A second explanation is that migrant flows have a destabilising effect on agents expectations about the fundamental value of houses. While the paper cannot satisfactorily distinguish between these two options, the results suggest that monetary policy can still be used to dampen the house price changes that occur at tim...
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