This paper develops and illustrates a simple method to generate a DSGE model-based forecast for variables that do not explicitly appear in the model (non-core variables). We use auxiliary regressions that resemble measurement equations in a dynamic factor model to link the non-core variables to...

When a rate of return is regressed on a lagged stochastic regressor, such as a dividend yield, the regression disturbance is correlated with the regressor's innovation. The OLS estimator's finite-sample properties, derived here, can depart substantially from the standard regression setting....

We develop a nonlinear state-space model that captures the joint dynamics of consumption, dividend growth, and asset returns. Our model consists of an economy containing a common predictable component for consumption and dividend growth and multiple stochastic volatility processes. The...

This paper studies the asymptotic relationship between Bayesian model averaging and post-selection frequentist predictors in both nested and nonnested models. We derive conditions under which their difference is of a smaller order of magnitude than the inverse of the square root of the sample...

Entering a currency union without any political union European countries have taken a gamble: will the needs of the currency union force a political integration (as anticipated by Monnet) or will the tensions create a backlash, as suggested by Kaldor, Friedman and many others? We try to answer...

We exploit a volcanic “experiment" to study the costs and benefits of geographic mobility. We show that moving costs (broadly defined) are very large and labor therefore does not flow to locations where it earns the highest returns. In our experiment, a third of the houses in a town were...