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Creator: Kocherlakota, Narayana Rao, 1963 Series: Lucas expectations anniversary conference Abstract: There were three important changes in the United States economy during the 1980s. First, from 198290, the decade featured the longest consecutive stretch of positive quarterly output growth in United States history. Second, wage inequality expanded greatly as the wages of highly skilled workers grew markedly faster than the wages of less skilled workers (Katz and Murphy (1992)). Finally, consumption inequality also expanded as the consumption of highly skilled workers grew faster than that of less skilled workers (Attanasio and Davis (1994)). This paper argues that these three aspects of the United States economic experience can be interpreted as being part of an efficient response to a macroeconomic shock given the existence of a particular technological impediment to full insurance. I examine the properties of efficient allocations of risk in an economic environment in which the outside enforcement of risksharing arrangements is infinitely costly. In these allocations, relative productivity movements have effects on both the current and future distribution of consumption across individuals. If preferences over consumption and leisure are nonhomothetic, these changes in the allocation of consumption will generate persistent cycles in aggregate output that do not occur in efficient allocations when enforcement is costless. Stichwort: Business cycle, Skilled workers, Risk, and Consumption Fach: E32  Prices, business fluctuations, and cycles  Business fluctuations ; Cycles and E21  Macroeconomics : Consumption, saving, production, employment, and investment  Consumption ; Saving ; Wealth 
Creator: Sargent, Thomas J. Series: Lucas expectations anniversary conference Stichwort: Robert Lucas, Rational expectations, and Economic history Fach: N01  Economic history  General  Development of the discipline : Historiographical ; Sources and methods and B22  History of economic thought since 1925  Macroeconomics 
Creator: Williamson, Stephen D. Series: Finance, fluctuations, and development Abstract: A cashinadvance model with sequential markets is constructed, where unanticipated monetary injections are nonneutral and can potentially produce large liquidity effects. However, if the monetary authority adheres to an optimal money rule, money should not respond to unanticipated shocks, so that a Friedman rule is suboptimal and the monetary authority does not exploit the liquidity effect. Quantitatively, the model can generate variability in money and nominal interest rates close to what is observed, and can produce data with no obvious evidence of the existence of liquidity effects. Stichwort: Monetary policy, Interest, Liquidity, Money, and Interest rates Fach: E52  Monetary policy, central banking, and the supply of money and credit  Monetary policy and E50  Monetary policy, central banking, and the supply of money and credit  General 
Creator: Williamson, Stephen D. Series: Lucas expectations anniversary conference Abstract: A cashinadvance model with sequential markets is constructed, where unanticipated monetary injections are nonneutral and can potentially produce large liquidity effects. However, if the monetary authority adheres to an optimal money rule, money should not respond to unanticipated shocks, so that a Friedman rule is suboptimal and the monetary authority does not exploit the liquidity effect. Quantitatively, the model can generate variability in money and nominal interest rates close to what is observed, and can produce data with no obvious evidence of the existence of liquidity effects. Stichwort: Monetary policy, Interest, Liquidity, Money, and Interest rates Fach: E52  Monetary policy, central banking, and the supply of money and credit  Monetary policy and E50  Monetary policy, central banking, and the supply of money and credit  General 
Creator: Ostroy, Joseph M. and Potter, Simon M. Series: Finance, fluctuations, and development Abstract: We formulate a representative consumer model of intertemporal resource reallocation in which fluctuations in equity prices contribute to the smoothing of consumption flows. Features of the model include (a) an incompletely observable stochastic process of productivity shocks leading to fluctuating confidence of beliefs and (b) technologies involving commitments of a resource good. These features are exploited to show that (1) equities are not a representative form of total wealth and (2) the valuation of currently active firms is not representative of the valuation of all firms. We examine the implications of (1) and (2) to argue that empirical findings for the volatility and 'value shortfall' of equity prices may be consistent with a frictionless representative consumer model having a low degree of riskaversion. Simulation of a calibrated version of the model for a riskneutral consumer shows that when the 'data' is analyzed according to current econometric procedures, it is found to exhibit volatility of the same order of magnitude as that found in the actual data, although the model contains no excess volatility. Stichwort: Technological commitments, Equity premium, Uncertainty of beliefs, Excess volatility, and Value shortfall Fach: G12  General financial markets  Asset pricing ; Trading volume ; Bond interest rates, E44  Money and interest rates  Financial markets and the macroeconomy, G14  General financial markets  Information and market efficiency ; Event studies, and E13  General aggregative models  Neoclassical 
Creator: Gourieroux, Christian, 1949, Renault, Eric., and Touzi, Nizar. Series: Simulationbased inference in econometrics Abstract: This paper is interested in the small sample properties of the indirect inference procedure which has been previously studied only from an asymptotic point of view. First, we highlight the fact that the Andrews (1993) medianbias correction procedure for the autoregressive parameter of an AR(1) process is closely related to indirect inference; we prove that the counterpart of the medianbias correction for indirect inference estimator is an exact bias correction in the sense of a generalized mean. Next, assuming that the auxiliary estimator admits an Edgeworth expansion, we prove that indirect inference operates automatically a second order bias correction. The latter is a well known property of the Bootstrap estimator; we therefore provide a precise comparison between these two simulation based estimators. Stichwort: Edgeworth correction, Econometrics, Bootstrap, Bias correction, Economic models, Indirect inference, and Simulation Fach: C13  Econometric and statistical methods : General  Estimation, C15  Econometric and statistical methods : General  Simulation methods, C32  Multiple or simultaneous equation models  Timeseries models ; Dynamic quantile regressions, and C22  Single equation models ; Single variables  Timeseries models ; Dynamic quantile regressions 
Creator: Diebold, Francis X., 1959 and Schuermann, Til. Series: Simulationbased inference in econometrics Abstract: The possibility of exact maximum likelihood estimation of many observationdriven models remains an open question. Often only approximate maximum likelihood estimation is attempted, because the unconditional density needed for exact estimation is not known in closed form. Using simulation and nonparametric density estimation techniques that facilitate empirical likelihood evaluation, we develop an exact maximum likelihood procedure. We provide an illustrative application to the estimation of ARCH models, in which we compare the sampling properties of the exact estimator to those of several competitors. We find that, especially in situations of small samples and high persistence, efficiency gains are obtained. Stichwort: Econometrics, Observationdriven models, ARCH models, Estimation, and Exact maximum likelihood estimation Fach: C22  Single equation models ; Single variables  Timeseries models ; Dynamic quantile regressions 
Creator: Canova, Fabio. and Ortega, Eva. Series: Simulationbased inference in econometrics Stichwort: Simulation, Dynamic general equilibrium models, Evaluation, Calibration, and Saving and investment correlations Fach: C15  Econometric and statistical methods : General  Simulation methods, D58  General equilibrium and disequilibrium  Computable and other applied general equilibrium models, and C52  Econometric modeling  Model evaluation and selection 
Creator: Stern, Steven. Series: Simulationbased inference in econometrics Stichwort: Simulation estimators, Estimation models, Monte Carlo experiment, Inference, Variance reduction, Unobserved heterogeneity, Multinomial probit, and Simulators Fach: C15  Econometric and statistical methods : General  Simulation methods 