We develop a nonlinear state-space model that captures the joint dynamics of consumption, dividend growth, and asset returns. Building on Bansal and Yaron (2004), our model consists of an economy containing a common predictable component for consumption and dividend growth and multiple...

We provide a new and superior measure of U.S. GDP, obtained by applying optimal signal-extraction techniques to the (noisy) expenditure-side and income-side estimates. Its properties -- particularly as regards serial correlation -- differ markedly from those of the standard expenditure-side...

Two often-divergent U.S. GDP estimates are available, a widely-used expenditure-side version GDPE, and a much less widely-used income-side version GDI . The authors propose and explore a "forecast combination" approach to combining them. They then put the theory to work, producing a superior...

In high-dimensional factor models, both the factor loadings and the number of factors may change over time. This paper proposes a shrinkage estimator that detects and disentangles these instabilities. The new method simultaneously and consistently estimates the number of pre- and post-break...

The time series fit of dynamic stochastic general equilibrium (DSGE) models often suffers from restrictions on the long-run dynamics that are at odds with the data. Relaxing these restrictions can close the gap between DSGE models and vector autoregressions. This paper modifies a simple...

We develop a two-sector monetary model with a centralized and decentralized market. Activities in the centralized market resemble those in a standard New Keynesian economy with price rigidities. In the decentralized market agents engage in bilateral exchanges for which money is essential. The...

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). The authors use auxiliary regressions that resemble measurement equations in a dynamic factor model to link the non-core...

This paper studies the dynamics of a New Keynesian dynamic stochastic general equilibrium (DSGE) model near the zero lower bound (ZLB) on nominal interest rates. In addition to the standard targeted-inflation equilibrium, we consider a deflation equilibrium as well as a Markov sunspot...

We develop a sequential Monte Carlo (SMC) algorithm for estimating Bayesian dynamic stochastic general equilibrium (DSGE) models, wherein a particle approximation to the posterior is built iteratively through tempering the likelihood. Using three examples consisting of an artificial state-space...

We develop a new class of nonlinear time-series models to identify nonlinearities in the data and to evaluate nonlinear DSGE models. U.S. output growth and the federal funds rate display nonlinear conditional mean dynamics, while inflation and nominal wage growth feature conditional...