Distributional Robustness of K-class Estimators and the PULSE

Recently, in causal discovery, invariance properties such as the moment criterion which two-stage least square estimator leverage have been exploited for causal structure learning: e.g., in cases, where the causal parameter is not identifiable, some structure of the non-zero components may be identified, and coverage guarantees are available. Subsequently, anchor regression has been proposed to trade-off invariance and predictability. The resulting estimator is shown to have optimal predictive performance under bounded shift interventions. In this paper, we show that the concepts of anchor regression and K-class estimators are closely related. Establishing this connection comes with two benefits: (1) It enables us to prove robustness properties for existing K-class estimators when considering distributional shifts. And, (2), we propose a novel estimator in instrumental variable settings by minimizing the mean squared prediction error subject to the constraint that the estimator lies in an asymptotically valid confidence region of the causal parameter. We call this estimator PULSE (p-uncorrelated least squares estimator) and show that it can be computed efficiently, even though the underlying optimization problem is non-convex. We further prove that it is consistent. We perform simulation experiments illustrating that there are several settings including weak instrument settings, where PULSE outperforms other estimators and suffers from less variability.Comment: 85 pages, 15 figure

Fiscal Policy in the Aftermath of 9/11

This paper investigates the nature of U.S. fiscal policy in the aftermath of 9/11. We argue that the recent dramatic fall in the government surplus and the large fall in tax rates cannot be accounted for by either the state of the U.S. economy as of 9/11 or as the typical response of fiscal policy to a large exogenous rise in military expenditures. Our evidence suggests that, had tax rates responded in the way they `normally' do to large exogenous changes in government spending, aggregate output would have been lower and the surplus would not have changed by much. The unusually large fall in tax rates had an expansionary impact on output and was the primary force underlying the large decline in the surplus. Our results do not bear directly on the question of whether the decline in tax rates and the decline in the surplus after 9/11 were desirable or not.

Why has home ownership fallen among the young?

We document that home ownership of households with “heads\" aged 25-44 years fell substantially between 1980 and 2000 and recovered only partially during the 2001-2005 housing boom. The 1980-2000 decline in young home ownership occurred as improvements in mortgage opportunities made it easier to purchase a home. This paper uses an equilibrium life-cycle model calibrated to micro and macro evidence to understand why young home ownership fell over a period when it became easier to own a home. Our findings indicate that a trend toward marrying later and the increase in household earnings risk that occurred after 1980 account for 3/5 to 4/5 of the decline in young home ownership <br><br> Keywords; housing, home ownership, tenure choice, first-time home-buyers, marriage, income risk <br><br>

Fiscal policy in the aftermath of 9/11

This paper investigates the nature of U.S. fiscal policy in the aftermath of 9/11. We argue that the recent dramatic fall in the government surplus and the large fall in tax rates cannot be accounted for by either the state of the U.S. economy as of 9/11 or as the typical response of fiscal policy to a large exogenous rise in military expenditures. Our evidence suggests that, had tax rates responded in the way they ‘normally’ do to large exogenous changes in government spending, aggregate output would have been lower and the surplus would not have changed by much. The unusually large fall in tax rates had an expansionary impact on output and was the primary force underlying the large decline in the surplus. Our results do not bear directly on the question of whether the decline in tax rates and the decline in the surplus after 9/11 were desirable or not.Fiscal policy ; Terrorism

Hierarchies of factor solutions in the intelligence domain : applying methodology from personality psychology to gain insights into the nature of intelligence

A

Evaluating the Calvo Model of Sticky Prices

Can variants of the classic Calvo (1983) model of sticky prices account for the statistical behavior of post-war US inflation? We develop and test versions of the model for which the answer to this question is yes. We then investigate whether these models imply plausible degrees of inertia in price setting behavior by firms. We find that they do, but only if we depart from two auxiliary assumptions made in standard expositions of the Calvo model. These assumptions are that monopolistically competitive firms face a constant elasticity of demand and capital can be instantaneously reallocated after a shock. When we modify these assumptions our model is consistent with the view that firms re-optimize prices

How does an increase in government purchases affect economy?

This article studies the impact on aggregate economic activity of increases in defense purchases which are unrelated to other developments in the economy. The authors use empirical evidence to evaluate the predictions of several prominent models.Economic development ; Macroeconomics ; Labor market ; Expenditures, Public ; Defense industries

Evaluating the Calvo model of sticky prices

This paper studies the empirical performance of a widely used model of nominal rigidities: the Calvo model of sticky goods prices. We describe an extended version of this model with variable elasticity of demand of the differentiated goods and imperfect capital mobility. We find little evidence against standard versions of the model without the extensions, but the estimated frequency of price adjustment is implausible. With the extended model the estimates are more reasonable. This is especially so if the sample is split to take into account a possible change in monetary regime around 1980.Prices

Testing the Calvo model of sticky prices

This article discusses the empirical performance of a widely used model of nominal rigidities: the Calvo model of sticky good prices. The authors argue that there is overwhelming evidence against this model. But this evidence is generated under three key assumptions: one, there is no lag between the time firms reoptimize their price plans and the time they implement those plans; two, there is no measurement error in inflation; and three, monetary policy is the same in the pre-1979 and post-1982 periods. The authors discuss the impact of relaxing each of these assumptions.Prices ; Macroeconomics