An Empirical Investigation of the Lucas Hypothesis: the Yield Curve and on Linearity in the Money-Output Relationship

Existing evidence about the effectiveness of money growth to stimulate economic activity has been criticized from different perspectives. In addition, high correlation between money and output is not helpful to detect the direction of causality. From a policy perspective, in fact, positive correlation may arise from two opposite policy conducts: either the monetary authority sets the supply of money to influence future output fluctuations, or the central bank controls money growth as a reaction to the recent evolution of macro variables. In this work the relationship between money and output is analysed within a non linear framework that ascribes a primary role to expectations. In particular, we find evidence that the Lucas (1973) hypothesis, that exists an inverse correlation between the variance of nominal shocks and the magnitude of output response to nominal shocks, is supported by data evidence when the yield curve is either flat or downward sloping. We also provide evidence suggesting that the Friedman (1977) hypothesis, that the variability of inflation exerts a negative effect on the natural level of output, holds when a positive risk premium is incorporated in an upward sloping term structure of interest rates.Term Structure, Kalman Filtering, Expectations, Output Growth.

Yield curve, time varying term premia, and business cycle fluctuations

Using data for U.S. and Canada, we find evidence of the time-varying nature of risk premia, which are obtained as difference between long term interest rates and their expected values. We then apply Kalman filtering to extract the conditional variance of term premia prediction errors; our results highlight that this variable is informative beyond term premia and spreads, and it significantly improves upon prediction capability of standard models. In particular, the conditional variance of term premia, reflecting the high volatility of financial markets, anticipates movements in the output growth. Empirical evidence supports the inverse correlation between term premia and business cycle fluctuations. Data suggest that a deterioration of financial markets conditions, as captured by the increased volatility of term premia, anticipates a decline in the output growth. Therefore, term premia conditional volatility has an adverse effect on the economy.Term Structure; Term Premia; Kalman Filtering; Industrial Production Growth

The term structure and the expectations hypothesis: a threshold model

The expectations hypothesis implies that rational investors can predict future changes in interest rates by simply observing the yield spread. According to Mishkin (1990) the expectations theory can also be reformulated in terms of the ability of the spread to predict future inflation. Unfortunately, although appealing, the theory has found little empirical support. Time-varying term premia and changing risk perception have been advocated to rationalize the aforementioned weak empirical evidence. In this work we suggest that the time-varying nature of term premia makes single-equation models inappropriate to analyse the informative content of the term structure. In particular, when the deviations between the expected and the actual spread are large, which occurs in times of soaring term premia volatility, linear models fail to support the expectations theory. Within a threshold model for term premia, we provide evidence that the yield spread contains valuable information to predict future interest rates changes once the risk-averse attitude of economic agents is appropriately considered. Empirical results show that the predictive ability of the yield spread is contingent on the level of uncertainty as captured by the size of monetary policy surprise.Expectations Hypothesis, Term Premia, Threshold Models

An Empirical Analysis of the Curvature Factor of the Term Structure of Interest Rates

This work extends the strand of literature that examines the relation between the term structure of interest rates and macroeconomic variables. The yield curve is summarized by few latent factors (level, slope, and curvature) which are obtained through Kalman filtering. In this paper, we address the challenging issue of attributing an economic interpretation to the third unobservable component of the term structure, i.e. curvature. In particular, we find significant evidence suggesting that curvature reflects the cyclical fluctuations of the economy. Interestingly, this result holds in spite of whether the curvature factor is extracted from the nominal or the real term structure. A negative shock to curvature seems either to anticipate or to accompany a slowdown in economic activity. The curvature effect thus appears to complement the transition from an upward sloping yield curve to a flat one. Finally, a joint macro-econometric model for curvature and real activity is developed and estimated.Term Structure, Kalman Filtering, Latent Factors, Curvature, Business Cycle

The Term Structure and the Expectations Hypothesis: a Threshold Model

The expectations hypothesis implies that rational investors can predict future changes in interest rates by simply observing the yield spread. According to Mishkin (1990) the expectations theory can also be reformulated in terms of the ability of the spread to predict future inflation. Unfortunately, although appealing, the theory has found little empirical support. Time-varying term premia and changing risk perception have been advocated to rationalize the aforementioned weak empirical evidence. In this work we suggest that the time-varying nature of term premia makes single-equation models inappropriate to analyse the informative content of the term structure. In particular, when the deviations between the expected and the actual spread are large, which occurs in times of soaring term premia volatility, linear models fail to support the expectations theory. Within a threshold model for term premia, we provide evidence that the yield spread contains valuable information to predict future interest rates changes once the risk-averse attitude of economic agents is appropriately considered. Empirical results show that the predictive ability of the yield spread is contingent on the level of uncertainty as captured by the size of monetary policy surprise.Expectations Hypothesis, Term Premia, Threshold Models.

Empirical essays in macroeconomics and finance

This work provides an empirical examination of the relationship between macroeconomics and finance. In particular, we exploit non linear econometric methods to analyse the information content of the term structure of interest rates. We find that both monetary and financial variables are useful to predict the future evolution of economic activity

Micromechanical Mass Correlation Spectroscopy for the Characterization of Nanoparticles and Biomolecular Complexes in Fluid

Despite the wide range of techniques for the analysis of sub-micrometer objects, label-free characterization of nanoparticles in solution still remains a challenge. Micromechanical resonators with embedded fluidic channels have recently emerged as an enabling new technology for the mass characterization of suspended particles. However, technological limitations have prevented their application to particles and biomolecular complexes less than ∼1 attogram (0.6 MDa) in mass. In this thesis, correlation analysis of the time-domain mass signal is introduced as a novel method to extend the application of microfluidic resonators to samples in sub-MDa mass range. This method, called mass correlation spectroscopy (MCS), allows the detection of suspended particles even when their signatures in the time-trace cannot be individually recognized. The analysis is formally derived and the limits of detection for resonators of different dimensions are discussed. It is shown that the resolution of the analysis is not limited by the measurement noise, and the signal-to-noise ratio can be improved by increasing particle concentration and acquisition time. Measurements on validated samples prove that resolution enhancement of over five orders of magnitude can be obtained in usual experimental conditions. After derivation of an approximate model for the transport of particles in the embed- ded channel, particle size is inferred from the shape of the correlation curve, enabling the microfluidic resonators to detect mass, size and density of particles in solution in a single experiment. Limitations on the detection of samples composed of a heterogeneous population of particles are discussed. Proof-of-principle application of the MCS method for the mass characterization of samples of biological interest is presented. The time course of amyloid formation is monitored from the early state of amorphous aggregates to mature fibrils by detecting the increase in average mass of the complexes in solution. As another application, the quantification of surface coatings of nanoparticles is discussed; the detection method is validated by measuring the adsorption of a protein monolayer on the surface of 400 nm polystyrene beads. Finally, proof-of-concept measurements of ribosomes are presented, proving that correlation analysis might find wide application in the characterization of biomolecular complexes in solution

Calibration of the dynamic behaviour of incomplete structures in archeological sites: The case of Villa Diomede portico in Pompeii

This paper reports the research activities carried out on Villa Diomede in Pompeii, built during the "Pre-Roman period" (i.e. the 3rd century BC) and discovered between 1771 and 1774 during the archaeological excavations. It is one of the greatest private buildings of Pompeii and it is located on the western corner of the modern archeological site. Three levels compose the building: the ground floor, the lower quadriportico with a square plan and a series of colonnades on the four sides around the inner garden and the cryptoportico. Villa Diomede was damaged by the strong earthquake occurred in AD 63 that caused the collapse of the western pillars of the quadriportico and later damaged after the big eruption of Vesuvius in AD 79. In June 2015 a series of nondestructive tests (NDT) were carried out by the authors in order to obtain information on the state of conservation of the building and to assess its structural behavior. Direct and tomographic sonic pulse velocity tests, ground penetrating radar, endoscopies and operational modal analysis were performed on the remaining structural elements on the two levels of the Villa. The present paper reports the main outcomes and findings of ambient vibration tests implemented to extract the modal parameters in terms of eigenfrequencies, mode shapes and damping ratios. Operational modal analysis and output-only identification techniques were applied to single stone pillars of the quadriportico structure and then to the entire square colonnade of Villa Diomede. Results are then used to study the soil-structure interaction at a local level and extend the gained information for the numerical calibration of the whole structure. Thanks to this methodology a detailed model updating procedure of the quadriportico was performed to develop reliable numerical models for the implementation of advance structural and seismic analysis of this "incomplete" archaeological structure

Agricultural commodities and financial markets

The sharp raise of the price of agricultural commodities between 2006 and 2008 seems to have a rationalization that goes beyond the mere interaction between supply and demand. Data evidence suggests that financial factors, rather than real determinants, played an important role in determining the dynamics of agricultural commodity prices. In particular, there seems to be a common source underlying food price changes and the financial markets dynamics. Evidence based on principal components supports the view that large fluctuations of food commodity prices can be related to portfolios adjustments of financial agents. We find robust evidence of a strong inverse correlation between financial markets’ returns and the movements of food commodity prices. Moreover, such an inverse relationship has clearly emerged during the recent financial crisis

Yield curve, time varying term premia, and business cycle fluctuations

Using data for U.S. and Canada, we find evidence of the time-varying nature of risk premia, which are obtained as difference between long term interest rates and their expected values. We then apply Kalman filtering to extract the conditional variance of term premia prediction errors; our results highlight that this variable is informative beyond term premia and spreads, and it significantly improves upon prediction capability of standard models. In particular, the conditional variance of term premia, reflecting the high volatility of financial markets, anticipates movements in the output growth. Empirical evidence supports the inverse correlation between term premia and business cycle fluctuations. Data suggest that a deterioration of financial markets conditions, as captured by the increased volatility of term premia, anticipates a decline in the output growth. Therefore, term premia conditional volatility has an adverse effect on the economy