This paper considers factor estimation from heterogenous data, where some of the variables are noisy and only weakly informative for the factors. To identify the irrelevant variables, we search for zero rows in the loadings matrix of the factor model. To sharply separate these irrelevant...

This paper presents a novel Bayesian method for estimating dynamic stochastic general equilibrium (DSGE) models subject to a constrained posterior distribution of the implied Sharpe ratio. We apply our methodology to a DSGE model with habit formation in consumption and leisure, using an estimate...

Present value calculations require predictions of cash flows both at near and distant future points in time. Such predictions are generally surrounded by considerable uncertainty and may critically depend on assumptions about parameter values as well as the form and stability of the data...

This paper considers Bayesian regression with normal and doubleexponential priors as forecasting methods based on large panels of time series. We show that, empirically, these forecasts are highly correlated with principal component forecasts and that they perform equally well for a wide range...

We focus on a quantitative assessment of rigid labor markets in an environment of stable monetary policy. We ask how wages and labor market shocks feed into the inflation process and derive monetary policy implications. Towards that aim, we structurally model matching frictions and rigid wages...

This paper addresses the relative importance of monetary indicators for forecasting inflation in the euro area in a Bayesian framework. Bayesian Model Averaging (BMA)based on predictive likelihoods provides a framework that allows for the estimation of inclusion probabilities of a particular...

This paper analyzes the evolution of the degree of global cyclical interdependence over the period 1960-2005. We categorize the 106 countries in our sample into three groups: industrial countries, emerging markets, and other developing economies. Using a dynamic factor model, we then decompose...

Distinguishing pure supply effects from other determinants of price and quantity in the market for loans is a notoriously difficult problem. Using German data, we employ Bayesian vector autoregressive models with sign restrictions on the impulse response functions in order to enquire the role of...

This paper introduces a stress test of the corporate credit portfolios of 24 large German banks by a two-stage approach: First, a macro-econometric model is used to forecast the impact of a substantial increase of the user cost of business capital for firms worldwide on three particularly...

In this paper we stress-test credit portfolios of 28 German banks based on a Mertontype multi-factor credit risk model. The ad-hoc stress scenario is an economic downturn in the automobile industry that constitutes an exceptional but plausible event suggested by historical data. Rather than on a...