Creator: Muench, Thomas J., Rolnick, Arthur J., 1944-, Wallace, Neil, and Weiler, William Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 019 Abstract:
Prediction interval tests are applied to the reduced forms of two quarterly models of the U.S. (the "old" FRB-MIT model and the Michigan model). The results illustrate the range of tests one can perform on an estimated simultaneous equation model. In particular, the tests determine whether ex post forecast errors can be attributed to structural deficiencies of the models. The paper examines confidence regions and other aspects of forecast distributions-comparisons between mean forecasts and nonstochastic forecasts, comparisons between, forecast variances from multiperiod endogenous simulations and those from one period simulations, and comparisons between forecast variances and residual variances.
关键词: Monte Carlo experiment, Michigan quarterly model, and FRB-MIT quarterly model 学科: C53 - Forecasting Models; Simulation Methods, C52 - Model Evaluation, Validation, and Selection, and C30 - Multiple or Simultaneous Equation Models; Multiple Variables: General
Creator: Aiyagari, S. Rao and Peled, Dan Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 503 Abstract:
It is often argued that with a positively skewed income distribution (median less than mean) a majority voting over proportional tax rates would result in higher tax rates than those that maximize average welfare, and will accordingly reduce aggregate savings. We reexamine this view in a capital accumulation model, in which distorting redistributive taxes provide insurance against idiosyncratic shocks, and income distributions evolve endogenously. We find small differences of either sign between the tax rates set by a majority voting and a utilitarian government, for reasonable parametric specifications. We show how these differences reflect a greater responsiveness of a utilitarian government to the average need for the insurance provided by the tax-redistribution scheme. These conclusions remain true despite the fact that the model simulations produce positively skewed distributions of total income across agents.
关键词: Votes, Income distribution, and Taxes 学科: E62 - Fiscal Policy and D72 - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
Creator: Smith, Bruce D. (Bruce David), 1954-2002 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 232 Abstract:
A model of a "real" business cycle is produced in which labor market participants possess private information. A class of economies is considered in which interesting cycles cannot arise without private information. A methodology adapted from Kydland and Prescott (1982) is then employed to show that models based on private information can empirically confront salient features of postwar U.S. business cycles. Moreover, this can be done in a way which is consistent with existing microeconomic evidence on wages and labor supply. Finally, it is shown that the important features of the model related to private information are fairly general.
关键词: Labor contracts, Unemployment, Assymetric information, and Labor markets 学科: E32 - Business Fluctuations; Cycles and D82 - Asymmetric and Private Information; Mechanism Design
Creator: Roberds, William Series: Business analysis committee meeting Abstract:
One of the more significant developments in econometric modeling over the past decade has been the invention of the forecasting technique known as Bayesian vector autoregression (BVAR). This paper provides a detailed description of the process of specifying a BVAR model of quarterly time series on the U.S. macroeconomy. The postsample forecasting performance of the model is evaluated at an informal level by comparing the model's performance to certain naive forecasting methods, and is evaluated at a formal level by means of efficiency tests. Although the null hypothesis of efficiency is rejected for the model's forecasts, the accuracy of the model exceeds that of naive forecasting methods, and seems comparable to that of commercial forecasting firms for early quarter forecasts.
关键词: BVAR, Vector autoregression, and Bayesian analysis 学科: C11 - Bayesian Analysis: General and C53 - Forecasting Models; Simulation Methods
Creator: Hopenhayn, Hugo Andres and Vereshchagina, Galina. Series: Advances in dynamic economics Abstract:
Entrepreneurs bear substantial risk, but empirical evidence shows no sign of a positive premium. This paper develops a theory of endogenous entrepreneurial risk taking that explains why self-financed entrepreneurs may find it optimal to invest into risky projects offering no risk premium. The model has also a number of implications for firm dynamics supported by empirical evidence, such as a positive correlation between survival, size, and firm age.
关键词: Intertemporal firm choice, Investment, Borrowing constraints, Financing, Risk taking, Occupational choice, and Firm dynamics 学科: G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill, L25 - Firm Performance: Size, Diversification, and Scope, E21 - Macroeconomics: Consumption; Saving; Wealth, and L26 - Entrepreneurship
Creator: Glosten, Lawrence R., Jagannathan, Ravi, and Runkle, David Edward Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 505 Abstract:
Earlier researchers have found either no relation or a positive relation between the conditional expected return and the conditional variance of the monthly excess return on stocks when they used the standard GARCH-M model. This is in contrast to the negative relation found when other approaches were used to model conditional variance. We show that the difference in the estimated relation arises because the standard GARCH-M model is misspecified. When the standard model is modified allow for (i) the presence for seasonal patterns in volatility, (ii) positive and negative innovations to returns to having different impacts on conditional volatility, and (iii) nominal interest rates to affect conditional variance, we once again find support for a negative relation. Using the modified GARCH-M model, we also show that there is little evidence to support the traditional view that conditional volatility is highly persistent. Also, positive unanticipated returns result in a downward revision of the conditional volatility whereas negative unanticipated returns result in an upward revision of conditional volatility of a similar magnitude. Hence the time series properties of the monthly excess return on stocks appear to be substantially different from that of the daily excess return on stocks.
关键词: Rate of return, Asset valuation, Stocks, Return rate, Stock market, and Risk 学科: G12 - Asset Pricing; Trading Volume; Bond Interest Rates and G11 - Portfolio Choice; Investment Decisions
Creator: Krusell, Per and Ríos-Rull, José-Víctor Series: Conference on economics and politics Abstract:
Some economic policies and regulations seem to have only one purpose: to prevent technological development and economic growth from occurring. In this paper, we attempt to rationalize such policies as outcomes of voting equilibria. In our environment, some agents will be worse off if the economy grows, since their skills are complementary to resources that can be allocated to growth-stimulating activities. In the absence of arrangements where votes are traded, we show that for some initial skill distributions, the economy may stagnate due to growth-preventing policies. Different initial skill distributions, however, lead to voting outcomes and policies in support of technological development, and to persistent economic growth. In making our argument formally, we use a dynamic model with induced heterogeneity in agents' skills. In their voting decisions, agents compare how they will be affected under each policy alternative, and then vote for the policy that maximizes their welfare.
学科: O41 - One, Two, and Multisector Growth Models and O31 - Innovation and Invention: Processes and Incentives
Creator: Krusell, Per, Quadrini, Vincenzo, and Ríos-Rull, José-Víctor Series: Lucas expectations anniversary conference Abstract:
We use political-equilibrium theory and the neoclassical growth model to compare the quantitative properties of different tax systems. We first explore whether societies which can only use consumption taxes fare better than societies which can only use income taxes. We find that if government outlays are used mainly for redistribution through transfers, then the answer is no, contradicting conventional wisdom in public finance. The reason for this is that when taxes are endogenous, and voted on by a selfish constituency, the distortionary effects of taxation are taken into account in choosing the level of taxation. Hence, political equilibria have the property that taxes which are relatively distortionary will be relatively low. These results are overturned if the government outlays are used only for the providing of public goods, implying that less distortionary taxes give better outcomes. We also investigate the properties of a tax systems in which both consumption and income taxes are used and voted on simultaneously. Since the ability to use more tax instruments allows redistribution with less distortions, the total amount of transfers tends to be higher here than in one-tax systems. Typically, tax systems tend to be self-perpetuating in the sense that changes of the tax system result in a reduction in the welfare of the median voter.
关键词: Tax system, Tax, Consumption tax, Taxes, and Income tax 学科: E62 - Fiscal Policy, H24 - Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes, and H25 - Business Taxes and Subsidies including sales and value-added (VAT)