This paper develops the theory of multi-step ahead forecasting for vector time series that exhibit temporal nonstationarity and co-integration. We treat the case of a semi-infinite past, developing the forecast filters and the forecast error filters explicitly, and also provide formulas for...

With rare exception, studies of monetary policy tend to neglect the timing of the innovations to the monetary policy instrument. Models which do take timing seriously are often difficult to compare to standard VAR models of monetary policy because of the differences in the frequency that they...

Data on consumption, earnings, wages and hours dispersion over the life cycle is commonly viewed as incompatible with a Pareto efficient allocation. We show that a model with preference and wage shocks and full insurance produces the rise in consumption, wages and hours dispersion over the life...

Regime switching models have been assuming an increasingly central role in financial applications because of their well-known ability to capture the presence of rich non-linear patterns in the joint distribution of asset returns. After reviewing key concepts and technical issues related to...

We perform a comprehensive examination of the recursive, comparative predictive performance of a number of linear and non-linear models for UK stock and bond returns. We estimate Markov switching, threshold autoregressive (TAR), and smooth transition autoregressive (STR) regime switching models,...

We derive a simplified version of the model of Fudenberg and Levine [2006, 2011] and show how this approximate model is useful in explaining choice under risk. We show that in the simple case of three outcomes, the model can generate indifference curves that “fan out” in the Marshack-Machina...

This paper analyzes the empirical performance of two alternative ways in which multi-factor models with time-varying risk exposures and premia may be estimated. The first method echoes the seminal two-pass approach advocated by Fama and MacBeth (1973). The second approach extends previous work...

We use a dynamic stochastic general equilibrium model to address two questions about U.S. monetary policy: 1) Can monetary policy elevate output when it is below potential? and 2) Is the zero lower bound a trap? The model answer to the first question is yes it can, but the effect is only...

In this paper we provide analytical and Monte Carlo evidence that Chow and Predictive tests can be consistent against alternatives that allow structural change to occur at either end of the sample. Attention is restricted to linear regression models that may have a break in the intercept. The...

In this paper we present a recursive method for the computation of dynamic competitive equilibria in models with heterogeneous agents and market frictions. This method is based on a convergent operator over an expanded set of state variables. The fixed point of this operator defines the set of...