This paper addresses two important questions that have, so far, been studied separately in the literature. First, the paper aims at explaining the high volatility of long-term interest rates observed in the data, which is hard to replicate using standard macro models. Building a small-scale...

In this paper, we show how to estimate the parameters of stochastic volatility models using Bayesian estimation and Markov chain Monte Carlo (MCMC) simulations through the approximation of the a-posteriori distribution of parameters. Simulated independent draws are made possible by using...

A trade-off exists between the Gelfand and Dey (1994) and Chib (1995) methods to calculate the marginal likelihood in Bayesian estimation. Using the Markov Chain Monte Carlo method, we demonstrate that the performance of the two methods is fairly close.

We estimate impacts of rainfall and temperature on corn yields by fitting a linear spline model with endogenous thresholds. Using Gibbs sampling and the Metropolis - Hastings algorithm, we simultaneously estimate the thresholds and other model parameters. A hierarchical structure is applied to...

This paper examines the forecasting performance of DSGE models with and without banking intermediation for the US economy. Over the forecast period 2001-2013, the model augmented with a banking sector leads to an improvement of point and density forecasts for inflation and the short term...

We propose a method for solving and estimating linear rational expectations models that exhibit indeterminacy and we provide step-by-step guidelines for implementing this method in the Matlab-based packages Dynare and Gensys. Our method redefines a subset of expectational errors as new...

Macroeconomic practitioners frequently work with multivariate time series models such as VARs, factor augmented VARs as well as time-varying parameter versions of these models (including variants with multivariate stochastic volatility). These models have a large number of parameters and, thus,...

In the light of new political initiatives in Latin America, discussions of expanding the monetary cooperation in the region have intensified and the idea of monetary union is gaining popularity. Since literature on the subject widely dismisses the feasibility of Latin America adopting a single...

We analyze the effectiveness of intervention in the European Monetary System by using daily data on the DEM-intervention activity of six European central banks, covering the period from August 1993 to April 1998. To test for the influence of intervention we apply EGARCH models. To allow for...

In this paper, we present stylized facts of exchange rate and intervention behavior in the Exchange Rate Mechanism I (ERM I), in particular in light of the recent literature on multilateral target zone models. We estimate bilateral exchange rate distributions of the maximum spot rate deviations...