The paper revisits dynamic term structure models (DTSMs) and proposes a new way in dealing with the limitation of the classical affine models. In particular, this paper expands the flexibility of the DTSMs by applying a fractional Brownian motion as the governing force of the state variable...

This paper focuses on the estimation of mutual fund styles by return-based style analysis. Usually, the investment style is assumed to be either constant through time, or time variation is implicitly accounted for by using rolling regressions. The former assumption is often contradicted by data...

The recent literature on monetary policy has questioned the use of linear Phillips curves and the assumption of a constant NAIRU. In this paper we explore monetary policy considering different shapes of the Phillips curve and an endogenous NAIRU. The NAIRU is, as recent papers suggest, made...

We estimate a unit root bilinear process using the Maximum Likelihood method with log-likelihood function constructed by means of the Kalman filter, and evaluate the finite sample properties of this estimator. One hundred and six world-wide price series are tested for unit root bilinearity...

A simulation smoother in state space time series analysis is a procedure for drawing samples from the conditional distribution of state or disturbance vectors given the observations. We present a new technique for this which is both simple and computationally efficient.

As recent research has shown one of the most important impediments to a successful conduct of monetary policy arises from the measurement error associated with output and inflation observations and the uncertainty regarding estimates of unobservables such as potential output. (See, for example,...

This paper uses an unobserved component model to examine the relative importance of the structural and the persistence approach to unemployment. We derive the NAIRU from a standard imperfect competition model. The price- and wage-setting schedules include a measure for unemployment persistence....

Recent studies by Dai and Singleton (2002), Duffee (2002), and Duarte (2004) show that affine term structure models that match the time variability of the expected returns of bond yields do not generate time variation in the volatility of interest rates. This failure indicates that affine models...

Adaptive Least Squares (ALS), i.e. recursive regression with asymptotically constant gain, as proposed by Ljung (1992), Sargent (1993, 1999), and Evans and Honkapohja (2001), is an increasingly widely-used method of estimating time-varying relationships and of proxying agents’...