It is widely known that when there are negative moving average errors, a high order augmented autoregression is necessary for unit root tests to have good size, but that information criteria such as the AIC and BIC tend to select a truncation lag that is very small. Furthermore, size distortions...

This paper considers the implications of omitted mean shifts for estimation and inference in VARs. It is shown that the least squares estimates are inconsistent, and the F test for Granger causality diverges. While model selection rules have the tendency to incorrectly select a lag length that...

If borrowing capacity of indebted households is tied to the value of their home, house prices should enter a correctly specified aggregate Euler equation for consumption. I develop a simple two-agent, dynamic general equilibrium model in which home (collateral) values affect debt capacity and...

This paper studies the error in forecasting a dynamic time series with a deterministic component. We show that when the data are strongly serially correlated, forecasts based on a model which detrends the data before estimating the dynamic parameters are much less precise than those based on an...

We consider issues related to the order of an autoregression selected using information criteria. We study the sensitivity of the estimated order to i) whether the effective number of observations is held fixed when estimating models of different order, ii) whether the estimate of the variance...

This paper extends the Competitive Storage Model by incorporating prominent features of the production process and financial markets. A major limitation of this basic model is that it cannot successfully explain the degree of serial correlation observed in actual data. The proposed extensions...

The non-negativity constraint on inventories imposed on the rational expectations theory of speculative storage implies that the conditional mean and variance of commodity prices are nonlinear in lagged prices and have a kink at a threshold point. In this paper, the structural parameters of this...

Relative prices are nonstationary and standard root-T inference is invalid for demand systems. But demand systems are nonlinear functions of relative prices, and standard methods for dealing with nonstationarity in linear models cannot be used. Demand system residuals are also frequently found...

This paper provides characterization theorems for preferences. The main assumption is partial separability, where changing a common component of two vectors does not reverse strict preferences, but may turn strict preferences into indifference. We discuss applications of our results to social...

Death statutes in the United States list elements of loss for which a defendant must make compensatory payment. The element that economists as expert witnesses are called upon to calculate is net income, roughly defined as the decedent's income minus personal expenses. The existence of joint or...