We develop a Markov Switching model for inflation with time-varying transition probabilities. Inflation is characterized by two regimes (high and low inflation) and the probability of regime changes depends on money growth. Using Bayesian techniques, we apply the model to the euro area, Germany,...

This chapter provides an overview of solution and estimation techniques for dynamic stochastic general equilibrium models. We cover the foundations of numerical approximation techniques as well as statistical inference and survey the latest developments in the field.

This paper undertakes a Bayesian analysis of optimal monetary policy for the U.K. We estimate a suite of monetary-policy models that include both forward- and backward-looking representations as well as large- and small-scale models. We find an optimal simple Taylor-type rule that accounts for...

We propose a method for solving and estimating linear rational expectations models that exhibit indeterminacy and we provide step-by-step guidelines for implementing this method in the Matlab-based packages Dynare and Gensys. Our method redefines a subset of expectational errors as new...

We propose a method for conducting inference on impulse responses in structural vector autoregressions (SVARs) when the impulse response is not point identified because the number of equality restrictions one can credibly impose is not sufficient for point identification and/or one imposes sign...

We propose a method for solving and estimating linear rational expectations models that exhibit indeterminacy and we provide step-by-step guidelines for implementing this method in the Matlab-based packages Dynare and Gensys. Our method redefines a subset of expectational errors as new...

We propose an hour-ahead prediction model for electricity prices that capture the heavy tailed behavior that we observe in the hourly spot market in the Ercot (Texas) and the PJM West hub grids. We present a model according to which we separate the price process into a thin-tailed trailing...

We develop a flexible semiparametric time series estimator that is then used to assess the causal effect of monetary policy interventions on macroeconomic aggregates. Our estimator captures the average causal response to discrete policy interventions in a macro-dynamic setting, without the need...

We use a threshold vector autoregression to study the effects of monetary policy shocks on the US. Depending on the level of inflation we note important regime dependence in the inflation response to monetary policy shocks.

When a rate of return is regressed on a lagged stochastic regressor, such as a dividend yield, the regression disturbance is correlated with the regressor's innovation. The OLS estimator's finite-sample properties, derived here, can depart substantially from the standard regression setting....