We present a new method for imposing and testing concavity of a cost function using asymptotic least squares, which can easily be implemented even for cost functions which are nonlinear in parameters. We provide an illustration on the basis of a (generalized) Box-Cox cost function with six...

Most analyses of the U.S. Great Moderation have been based on VAR methods, and have consistently pointed toward good luck as the main explanation for the greater macroeconomic stability of recent years. Using data generated by a New-Keynesian model in which the only source of change is the move...

Bayes' statistical rule remains the status quo for modeling belief updating in both normative and descriptive models of behavior under uncertainty. Recent research has questioned the use of Bayes' rule in descriptive models of behavior, presenting evidence that people overweight 'good news'...

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...

The COVID-19 pandemic has led to enormous data movements that strongly affect parameters and forecasts from standard VARs. To address these issues, we propose VAR models with outlier-augmented stochastic volatility (SV) that combine transitory and persistent changes in volatility. The resulting...