Conditional heteroskedasticity is an important feature of many macroeconomic and financial time series. Standard residual-based bootstrap procedures for dynamic regression models treat the regression eroor as i.i.d. These procedures are invalid in the presence of conditional heteroskedasticity....

Capital-labor substitution and total factor productivity (TFP) estimates are essential features of growth and income distribution models. In the context of a Monte Carlo exercise embodying balanced and near balanced growth, we demonstrate that the estimation of the substitution elasticity can be...

Following the 2000 stockmarket crash, have US interest rates been held too low in relation to their natural level? Most likely, yes. Using a structural neo-Keynesian model, this paper attempts a real-time evaluation of the US monetary policy stance while ensuring consistency between the...

We decompose the squared VIX index, derived from US S&P500; options prices, into the conditional variance of stock returns and the equity variance premium. We evaluate a plethora of state-of-the-art volatility forecasting models to produce an accurate measure of the conditional variance. We then...

In the paper we propose a new methodological approach to core inflation estimation, based on a frequency domain principal components estimator, suited to estimate systems of fractionally cointegrated processes. The proposed core inflation measure is the scaled common persistent factor in...

In this paper we study the zero frequency spectral properties of fractionally cointegrated long memory processes and introduce a new frequency domain principal components estimator of the cointegration space and the factor loading matrix for the long memory factors. We find that for fractionally...

This paper examines the interday and intraday dynamics of the euro area overnight money market on the basis of an original set of market activity and liquidity proxies constructed from both pre- and post-trade data. The empirical literature provides extensive evidence supporting the rejection of...

The market-oriented approach promoted by the European Central Bank in the design of its refinancing operations creates incentives to credit insitutions to use actively the interbank market to manage their liquidity needs. In this context, we examine the ability of the overnight segment to...

This paper proposes the use of the two-factor term-structure model of Longstaff and Schwartz (1992a, LS) to estimate the risk-neutral density (RND) of the future short-term interest rate. The resulting RND can be interpreted as the market's estimate of the density of the future short-term...

The rank of the Hankel matrix, corresponding to a system transfer function, is equal to the order of its minimal state space realization. The computation of the rank of the Hankel matrix is complicated by the fact that its block elements are rarely given exactly but are estimated instead. In...