Prior parameter uncertainty: Some implications for forecasting and policy analysis with VAR models

Models used for policy analysis should generate reliable unconditional forecasts as well as policy simulations (conditional forecasts) that are based on a structural model of the economy. Vector autoregression (VAR) models have been criticized for having inaccurate forecasts as well as being difficult to interpret in the context of an underlying economic model. In this paper, we examine how the treatment of prior uncertainty about parameter values can affect forecasting accuracy and the interpretation of identified structural VAR models. ; Typically, VAR models are specified with long lag orders and a diffuse prior about the unrestricted coefficients. We find evidence that alternatives that emphasize nonstationary aspects of the data as well as parsimony in parameterization have better out-of-sample forecast performance and smoother and more persistent responses to a given exogenous monetary policy change than do unrestricted VARs.Forecasting ; Vector autoregression ; Econometric models

Improving forecasts of the federal funds rate in a policy model

Vector autoregression (VAR) models are widely used for policy analysis. Some authors caution, however, that the forecast errors of the federal funds rate from such a VAR are large compared to those from the federal funds futures market. From these findings, it is argued that the inaccurate federal funds rate forecasts from VARs limit their usefulness as a tool for guiding policy decisions. In this paper, we demonstrate that the poor forecast performance is largely eliminated if a Bayesian estimation technique is used instead of OLS. In particular, using two different data sets we show that the forecasts from the Bayesian VAR dominate the forecasts from OLS VAR models—even after imposing various exact exclusion restrictions on lags and levels of the data.Forecasting ; Federal funds rate ; Vector autoregression

Asymmetric labor force participation decisions over the business cycle: evidence from U.S. microdata

The purpose of this paper is to explore the microfoundations of the observed asymmetric movement in aggregate unemployment rates. Using U.S. data, we find that individual labor force participation responds asymmetrically to changes in local labor market conditions, consistent with the pattern of movements in the aggregate unemployment rate. Differences in the asymmetry and sensitivity of labor force participation decisions are found across gender, age, and education groups, and these differences are used to anticipate changes in the aggregate movements as population characteristics change over time.

Resolving the liquidity effect.

Liquidity (Economics)

Groupoids: C*-algebras, Rapid Decay and Amenability.

Ph.D. Thesis. University of Hawaiʻi at Mānoa 2018

Earnings on the information technology roller coaster: insight from matched employer-employee data

This paper uses matched employer-employee data for the state of Georgia to examine workers’ earnings experience through the information technology (IT) sector’s employment boom of the mid-1990s and its bust in the early 2000s. The results show that even after controlling for individual characteristics before the sector’s boom, transitioning out of the IT sector to a non-IT industry generally resulted in a large wage penalty. However, IT service workers who transitioned to a non-IT industry still fared better than those who took a non-IT employment path. For IT manufacturing workers, there is no benefit to having worked in tech, likely because of the nontransferability of manufacturing experience to other industries.

The ups and downs of jobs in Georgia: what can we learn about employment dynamics from state administrative data?

This paper demonstrates how state administrative data (from Georgia) can be used to decompose net employment growth in order to track establishment births, deaths, contractions, and expansions over time. Even though net employment growth can look quite similar across industries, the composition of that employment change can look quite different. The panel nature of the data allow the authors to see that overall lack of expansion and continued contraction among large establishments were the driving forces behind the weak employment growth immediately following the 2001 recession.

Forecasting using relative entropy

The paper describes a relative entropy procedure for imposing moment restrictions on simulated forecast distributions from a variety of models. Starting from an empirical forecast distribution for some variables of interest, the technique generates a new empirical distribution that satisfies a set of moment restrictions. The new distribution is chosen to be as close as possible to the original in the sense of minimizing the associated Kullback-Leibler Information Criterion, or relative entropy. The authors illustrate the technique by using several examples that show how restrictions from other forecasts and from economic theory may be introduced into a model's forecasts.Forecasting

The push-pull effects of the information technology boom and bust: insight from matched employer-employee data

This paper examines the inflow and outflow of workers to different industries in Georgia during the information technology (IT) boom of the 1990s and the subsequent bust. Workers in the software and computer services industry were much more likely to have been absent from the Georgia workforce prior to the boom but were no more likely than workers from other industries to have exited the workforce during the bust. Consequently, the Georgia workforce likely experienced a net gain in worker human capital as a result of being an area of concentration of IT-producing activity during the IT boom.

Electromagnetic Coupling through Arbitrary Apertures in Parallel Conducting Planes

We propose a numerical methodto solve the problem of coupling through finite, but otherwise arbitrary apertures in perfectly conducting and vanishingly thin parallel planes. The problem is given a generic formulation using the Method of Moments and the Green's function in the region between the two planes is evaluated using Ewald's method. Numerical applications using Glisson's basis functions to solve the problem are demonstrated and compared with previously published results and the output of FDTD software