We model the U.S. business cycle using a dynamic factor model that identifies common factors underlying fluctuations in state-level income and employment growth. We find three such common factors, each of which is associated with a set of factor loadings that indicate the extent to which each...

The real interest rate plays a central role in many important financial and macroeconomic models, including the consumption-based asset pricing model, neoclassical growth model, and models of the monetary transmission mechanism. We selectively survey the empirical literature that examines the...

We model the US business cycle using a dynamic factor model that identifies common factors underlying fluctuations in state-level income and employment growth. We find three such common factors, each of which is associated with a set of factor loadings that indicate the extent to which each...

Ever since the seminal paper of, researchers have focused on the potential nonstationarity of important macroeconomic variables, and unit root tests are now a standard procedure in empirical analyses. While there are many findings of unit roots in macroeconomic variables using the popular...

We reconsider the out-of-sample forecasting ability of a large number of financial variables with respect to real output growth over the 1985:1--1999:4 period. We show that models including financial variables display almost no forecasting ability relative to an autoregressive benchmark model...

In this paper, we investigate the degree of persistence in quarterly postwar tax-adjusted ex post real interest rates for 13 industrialized countries using two recently developed econometric procedures. Our results show that international tax-adjusted real interest rates are typically very...

Common shocks, similarities in central bank reaction functions, and international trade potentially produce common components in international inflation rates. This paper characterizes such links in international inflation rates with a dynamic latent factor model that decomposes 64 national...