Estimates of the speed of convergence vary widely and depend on the methodology employed. While cross-sectional regressions typically find slow convergence, time series estimates suggest that incomes converge rapidly. This paper uses panel methods to combine cross-sectional and time series...

The time series literature reports two stylized facts about output dynamics in the United States. GNP growth is positively autocorrelated over short horizons and negatively autocorrelated over longer horizons, and GNP has an important trend reverting component which has a hump-shaped moving...

This paper studies the effects of applying the Hodrick-Prescott filter to trend and difference stationary time series. Applying the Hodrick-Prescott filter to an integrated process is similar to detrending a random walk. When the data are difference stationary, the Hodrick-Prescott filter can...

Applying the Hodrick-Prescott filter to both the approximating model and the data adds a constant to the log-likelihood function. Thus, maximum likelihood estimates and likelihood ratio statistics are invariant to symmetric HP filtering.

This paper uses household consumption data to investigate whether uninsurable idiosyncratic risk accounts for the equity premium. The analysis complements and extends prior empirical work by relaxing maintained assumptions about idiosyncratic income shocks. Following Mankiw (1986), the paper...

This paper proposes a new measure of core inflation and compares it with several existing measures. The new measure is adaptive and is designed to track sudden and persistent movements inflation, such as those arising from changes in monetary policy regimes. the adaptive measure is a superior...

This paper explores various strategies for estimating rational expectations models when the trend specification is uncertain. One approach modified the likelihood function in order to reduce the influence of low-frequency dynamics. Hansen and Sargent (1993) conjectured that this would have...

This paper extends the work of Hansen and Jagannathan (1997) by showing how to decompose approximation errors in stochastic discount factor models by frequency. This decomposition is applied to a number of prominent consumption-based discount factor models top investigate how well they fit at...