The Federal Reserve's Dual Mandate: A Time-Varying Monetary Policy Priority Index for the United States

In the United States, the Federal Reserve has a dual mandate of promoting stable inflation and maximum employment. Since the Fed directly controls only one instrument-the federal funds rate-the authors argue that the Fed's priorities continuously alternate between inflation and economic activity. In this paper, the authors assume that the effective weights put by the Fed on different indicators vary over time. To test this assumption, they estimate a monetary policy priority index by adding non-linear endogenous weights to a conventional Taylor-type rule.Monetary policy framework; Monetary policy implementation; Econometric and statistical methods

Endogenous Protection in General Equilibrium: estimating political weights in the EU

We examine the political economy underpinnings of import protection in general equilibrium. Starting from a dual theoretical representation of production, trade, and consumption, we map a general representation of the real economy to underlying political processes aka the political support function to derive a general representation of the determinants of import protection. This includes the relatively standard approach of examining the pattern of tariffs in a Grossman-Helpman framework, as well as recent extensions linked to upstream and downstream linkages between sectors. Because we start from a relatively generic general equilibrium model of production, we have an immediate bridge between the theory and general equilibrium-based estimates of the welfare effects and rents generated by tariffs. We therefore follow the development of our generalized theoretical framework by introducing the use of general equilibrium estimates of the direct and indirect marginal impacts of protection at the sector level for econometric estimation of the revealed pattern of policy weights. This GE approach yields direct estimates of political weights based on economic effects, including cross-industry effects. The resulting weights lend insight into relative protection of agriculture and manufacturing. Working with data on the European union, we find that the strength of downstream linkages matters for policy weights and rates of protection, as does the national posture of industry. We also find support for a general political support function in the determination of tariffs, though results are mixed for the more narrow Grossman-Helpman specification. In the EU, nationality of industry seems to play a role in the setting of Community-wide import protection.political weights, political economy of import protection, Grossman-Helpman model

Designing realised kernels to measure the ex-post variation of equity prices in the presence of noise

This paper shows how to use realised kernels to carry out efficient feasible inference on the ex-post variation of underlying equity prices in the presence of simple models of market frictions. The issue is subtle with only estimators which have symmetric weights delivering consistent estimators with mixed Gaussian limit theorems. The weights can be chosen to achieve the best possible rate of convergence and to have an asymptotic variance which is close to that of the maximum likelihood estimator in the parametric version of this problem. Realised kernels can also be selected to (i) be analysed using endogenously spaced data such as that in databases on transactions, (ii) allow for market frictions which are endogenous, (iii) allow for temporally dependent noise. The finite sample performance of our estimators is studied using simulation, while empirical work illustrates their use in practice.

Bayesian Forecast Combination for VAR Models

We consider forecast combination and, indirectly, model selection for VAR models when there is uncertainty about which variables to include in the model in addition to the forecast variables. The key dierence from traditional Bayesian variable selection is that we also allow for uncertainty regarding which endogenous variables to include in the model. That is, all models include the forecast variables, but may otherwise have diering sets of endogenous variables. This is a dicult problem to tackle with a traditional Bayesian approach. Our solution is to focus on the forecasting performance for the variables of interest and we construct model weights from the predictive likelihood of the forecast variables. The procedure is evaluated in a small simulation study and found to perform competitively in applications to real world data.Bayesian model averaging; Predictive likelihood; GDP forecasts

Estimation of De Facto Flexibility Parameter and Basket Weights in Evolving Exchange Rate Regimes

A new technique for estimating countries' de facto exchange rate regimes synthesizes two approaches. One approach estimates the implicit de facto basket weights in an ordinary least squares (OLS) regression of the local currency value rate against major currency values. Here the hypothesis is a basket peg with little flexibility. The second estimates the de facto degree of exchange rate flexibility by observing how exchange market pressure is allowed to show up. Here the hypothesis is an anchor to the dollar or some other single major currency, but with a possibly substantial degree of exchange rate flexibility around that anchor. It is important to have available a technique that can cover both dimensions: inferring anchor weights and the flexibility parameter. We test the synthesis technique on a variety of fixers, floaters, and basket peggers. We find that real world data demand a statistical technique that allows parameters and regimes to shift frequently. Accordingly we estimate de facto exchange rate regimes: endogenous estimation of parameter breakpoints, following Bai and Perron (1998).basket peg, currency, de facto, de jure, exchange rate, exchange market pressure, regime, peso, weights

Modeling Demand for Outdoor Recreation Settings with Choice Based Data Accounting for Exogenous and Endogenous Stratification

Estimating regional demand models by pooling different samples without correcting for such differences causes model misspecification as each sample belongs to a different population. Weighted regression using Pseudolikelihood to account for differences in sample population with adjustment for heteroskedasticity improves efficiency but the estimates are biased. We estimate regional demand for National Forest settings types in the southeastern states of U.S using weighted and unweighted regression. Using estimation of demand for National Forests as a case study, we resolve problems relating to inference about the data generating process when different samples are pooled together. We show that though efficiency of weighted estimates improves after correcting for heteroskedasticity, they still remain biased as the weights interact with covariates to explain part of model misspecification. In this paper, we show that it is best to use unweighted regression including interactions with weights as covariates.exogenous stratification, endogenous stratification, choice based data, outdoor recreation, Environmental Economics and Policy, Q000, Q500,

Endogenous post-stratification in surveys: classifying with a sample-fitted model

Post-stratification is frequently used to improve the precision of survey estimators when categorical auxiliary information is available from sources outside the survey. In natural resource surveys, such information is often obtained from remote sensing data, classified into categories and displayed as pixel-based maps. These maps may be constructed based on classification models fitted to the sample data. Post-stratification of the sample data based on categories derived from the sample data (``endogenous post-stratification'') violates the standard post-stratification assumptions that observations are classified without error into post-strata, and post-stratum population counts are known. Properties of the endogenous post-stratification estimator are derived for the case of a sample-fitted generalized linear model, from which the post-strata are constructed by dividing the range of the model predictions into predetermined intervals. Design consistency of the endogenous post-stratification estimator is established under mild conditions. Under a superpopulation model, consistency and asymptotic normality of the endogenous post-stratification estimator are established, showing that it has the same asymptotic variance as the traditional post-stratified estimator with fixed strata. Simulation experiments demonstrate that the practical effect of first fitting a model to the survey data before post-stratifying is small, even for relatively small sample sizes.Comment: Published in at http://dx.doi.org/10.1214/009053607000000703 the Annals of Statistics (http://www.imstat.org/aos/) by the Institute of Mathematical Statistics (http://www.imstat.org

A Review of Dietary Zinc Recommendations

Background. Large discrepancies exist among the dietary zinc recommendations set by expert groups. Objective. To understand the basis for the differences in the dietary zinc recommendations set by the World Health Organization, the U.S. Institute of Medicine, the International Zinc Nutrition Consultative Group, and the European Food Safety Agency. Methods. We compared the sources of the data, the concepts, and methods used by the four expert groups to set the physiological requirements for absorbed zinc, the dietary zinc requirements (termed estimated and/or average requirements), recommended dietary allowances (or recommended nutrient intakes or population reference intakes), and tolerable upper intake levels for selected age, sex, and life-stage groups. Results. All four expert groups used the factorial approach to estimate the physiological requirements for zinc. These are based on the estimates of absorbed zinc required to offset all obligatory zinc losses plus any additional requirements for absorbed zinc for growth, pregnancy, or lactation. However, discrepancies exist in the reference body weights used, studies selected, approaches to estimate endogenous zinc losses, the adjustments applied to derive dietary zinc requirements that take into account zinc bioavailability in the habitual diets, number of dietary zinc recommendations set, and the nomenclature used to describe them. Conclusions. Estimates for the physiological and dietary requirements varied across the four expert groups. The European Food Safety Agency was the only expert group that set dietary zinc recommendations at four different levels of dietary phytate for adults (but not for children) and as yet no tolerable upper intake level for any life-stage group