In this book, Andrew Harvey sets out to provide a unified and comprehensive theory of structural time series models. Unlike the traditional ARIMA models, structural time series models consist explicitly of unobserved components, such as trends and seasonals, which have a direct interpretation. As a result the model selection methodology associated with structural models is much closer to econometric methodology. The link with econometrics is made even closer by the natural way in which the models can be extended to include explanatory variables and to cope with multivariate time series. From the technical point of view, state space models and the Kalman filter play a key role in the statistical treatment of structural time series models. The book includes a detailed treatment of the Kalman filter. This technique was originally developed in control engineering, but is becoming increasingly important in fields such as economics and operations research. This book is concerned primarily with modelling economic and social time series, and with addressing the special problems which the treatment of such series poses. The properties of the models and the methodological techniques used to select them are illustrated with various applications. These range from the modellling of trends and cycles in US macroeconomic time series to to an evaluation of the effects of seat belt legislation in the UK.

Forecasting, Structural Time Series Models and the Kalman Filter

Enclosed is a copy of the Board of Governors’ Semiannual Agenda of Regulations for the period August 1, 1980 through February 1, 1981. The Semiannual Agenda provides you with information on those regulatory matters that the Board now has under consideration or anticipates considering over the next six months, and is divided into three parts: (1) regulatory matters that the Board had considered during the previous six months on which final action has been taken; (2) regulatory matters that have been proposed for public comment and that require further Board consideration; and (3) regulatory matters that the Board may consider over the next six months.

Federal Reserve Bank of New Yorkの制定せる財務諸表様式について

Over the last two decades, communication has become an increasingly important aspect of monetary policy. These real-world developments have spawned a huge new scholarly literature on central bank communication-mostly empirical, and almost all of it written in this decade. We survey this ever-growing literature. The evidence suggests that communication, can be an important and powerful part of the central bank's toolkit since it has the ability to move financial markets, to enhance the predictability of monetary policy decisions, and potentially to help achieve central banks' macroeconomic objectives. However, the large variation in communication, strategies across central banks suggests that a. consensus has yet to emerge, on what constitutes an optimal communication strategy.

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Central bank communication and monetary policy: A survey of theory and evidence

Recently, a number of authors have argued that the standard search model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies, given shocks of a plausible magnitude. We use data on the cost of vacancy creation and cyclicality of wages to identify the two key parameters of the model - the value of non-market activity and the bargaining weights. Our calibration implies that the model is, in fact, consistent with the data.

The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited

We propose a model that generates an economic expansion in response to good news about future total factor productivity (TFP) or investment-specific technical change. The model has three key elements: variable capital utilization, adjustment costs to investment, and preferences that exhibit a weak short-run wealth effect on the labour supply. These preferences nest the two classes of utility functions most widely used in the business cycle literature as special cases. Our model can generate recessions that resemble those of the post-war U.S. economy without relying on negative productivity shocks. The recessions are caused not by contemporaneous negative shocks but rather by lackluster news about future TFP or investment-specific technical change.

Can News About the Future Drive the Business Cycle

This paper explores an alternative theory based on learning dynamics. In the con text of an otherwise standard stochastic growth model, we consider an environment in which households and firms have an incomplete model of the macroeconomy, knowing only their own objectives, constraints, and beliefs. Agents are optimizing, have a completely specified belief system, but do not know the equilibrium map ping between primitive disturbances, the aggregate state of the economy, and mar ket clearing prices. By extrapolating from historical patterns in observed data they approximate this mapping to forecast variables that are exogenous to their decision problems, such as the rental rate of capital and the real wage. This belief structure has the property that beliefs affect the true data generating process of the economy which in turn affects belief formation. The economy is therefore self-referential: shifts in beliefs about future returns to labor and capital affect current market clear ing prices which in turn can reinforce beliefs. In this environment, current prices can become less informative about future economic conditions generating fluctuations in real activity. This kind of mechanism driving business cycle fluctuations is found in early writ ings on macroeconomic dynamics. For example, Alfred C. Pigou (1927), on page 122, writes:

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Expectations, Learning and Business Cycle Fluctuations

The value of communication in monetary policy is analyzed in a model in which expectations need not be consistent with central bank policy –and, therefore, “unanchored” –because agents face di¢ cult forecasting problems. When the central bank implements optimal policy without communication, the Taylor principle is not su¢ cient for macroeconomic stability: expectations are unanchored and self-ful…lling expectations are possible. To mitigate this instability, three communication strategies are contemplated to ensure consistency between private forecasts and monetary policy strategy: i) communicating the precise details of the monetary policy — that is, the variables and coe¢ cients; ii) communicating only the variables on which monetary policy decisions are conditioned; and iii) communicating the in‡ation target. The …rst two strategies restore the Taylor principle as a su¢ cient condition for anchoring expectations. In contrast, in economies with persistent shocks, communicating the in‡ation target fails to protect against expectations driven ‡uctuations. These results underscore the importance of communicating the systematic component of monetary policy strategy: announcing an in‡ation target is not enough to stabilize expectations — one must also announce how this target will be achieved.

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Central bank communication and expectations stabilization

https://www.econstor.eu/bitstream/10419/100712/1/wp2003-20.pdf

Did the Great Inflation occur despite policymaker commitment to a Taylor rule

https://gcoe.ier.hit-u.ac.jp/JEDC2010/doc/2-1.pdf

Fitting observed inflation expectations

We estimate the elasticity of intertemporal substitution (EIS) — the elasticity of expected consumption growth with respect to variation in the real interest rate — using subjective expectations from the newly released FRBNY Survey of Consumer Expectations (SCE). This dataset is unique, since it includes consumers’ expectations of both consumption growth and inflation, with the latter providing subjective variation in ex ante real interest rates. As a result, we can estimate a subjective version of the consumption Euler equation, without having to take a stand on the process of expectation formation. Our main finding is that this subjective EIS is precisely and robustly estimated to be around 0.8 in the general population, consistent with typical macroeconomic calibrations of the Euler equation. However, we find some evidence that the EIS rises to slightly above one for high-income individuals, consistent with the assumptions in asset pricing models featuring long-run risks or rare disasters.

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Stefano Eusepi

Papers

Expectations, Learning and Business Cycle Fluctuations

Central bank communication and expectations stabilization

Did the Great Inflation occur despite policymaker commitment to a Taylor rule

Fitting observed inflation expectations

Subjective Intertemporal Substitution