Persistence in economic variables is common. We re-examine that using a time-varying parameter model. Results support a substantial reduction in persistence, particularly, when allowing for time-variation in the constant. This has important implications for policy-making and the effect of shocks.

We investigate return predictability and the implied intertemporal hedging demands for stocks and bonds in the U.S., Australia, Canada, France, Germany, Italy, and U.K. We first estimate predictive regression models for domestic bill, stock, and bond returns in each country, where returns depend...

The Tax Act of 1986 changed the tax treatment of tax-exempt municipal bonds for banks. Since banks were the dominant participant in the municipal bond market until 1986, some believe that this resulted in the breakdown of the long-run equilibrium relationship between municipal and U.S. treasury...

This article investigates the long-run relationship between prices and wage-adjusted productivity as well as between real wages and average labor productivity at the industry level for a panel of 459 U.S. manufacturing industries over the period 1956–1996. Panel cointegration test results...

In this paper, we show that the data have difficulty distinguishing a stock price decomposition in which expectations of future real dividend growth is a primary determinant of stock price movements from one in which expectations of future excess returns are a primary determinant. The data...

This paper investigates the near unit root behavior of interest rate differentials across countries using a symmetric Band–TAR model that allows for a heteroscedastic error process. We find that the time series properties of monthly short-term interest differentials over the period 1974–2005...