Showing papers by "Federal Reserve Bank of St. Louis published in 1987"
TL;DR: In this article, the authors show that the Cochrane-Orcutt transformation is strictly less efficient than a weighted generalized least squares estimator which gives the initial observation less weight than the true model requires.
11 citations
3 citations
TL;DR: In this article, the authors derived theoretical hedge ratios for the financial portfolio that preserve its present value in the presence of interest rate risk and showed that wealth-preserving hedges depend on the interest elasticities (durations) of the spot assets and liabilities contained in the portfolio.
Abstract: This paper derives theoretical hedge ratios for the financial portfolio that preserve its present value in the presence of interest rate risk. From a practical point of view and for any given portfolio, the existence of the financial futures market allows the investor to employ any of a number of different hedges, each of which approximately satisfies the theoretical condition. The theory indicates that wealth-preserving hedges depend on the interest elasticities (durations) of the spot assets and liabilities contained in the portfolio, portfolio leverage, and the interest elasticity (duration) of the financial instrument underlying the futures contract that is employed in constructing the hedge. Also, hedges designed to maintain net interest margin or net cash flow do not minimize exposure to interest rate risk.
2 citations
TL;DR: This article showed that increased uncertainty about monetary policy has long-run negative effects on both the level and growth rate of GNP, using a Kalman filter estimate of monetary uncertainty to a St. Louis-type GNP equation.
Abstract: Mascaro and Meltzer (1983) have implied, but not tested, the proposition that increased uncertainty about monetary policy will reduce real income. This proposition is tested directly by adding a Kalman filter estimate of monetary uncertainty to a St. Louis-type GNP equation. The results indicate that increased uncertainty about monetary policy has long-run negative effects on both the level and growth rate of GNP.