macro_hw1 - labor income shares are more or less constant...

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ECO 476: Macroeconomics II Homework 1 Due: First Recitation Session. 1. Using the post-war U.S. time series data, examine whether “Kaldor’s stylized facts 1-5” holds. For the time series of capital stock, com- pute from the time series of investment using the following “perpetual inventory” method. (a) Start with an initial investment I 0 . (b) Approximate the initial capital, K 0 = I 0 g X + δ by assuming that the economy is near the steady state. g X and δ K denotes the average growth rate of investment (or output) and depreciation rate of capital. Assume δ = 8% at the annual frequency and compute g X from the first ten years of your sample. (c) Compute the capital stock series using K t +1 = (1 - δ ) K t + I t for t = 1 , 2 , ... and so on. 2. Examine whether the so-called big ratios (e.g., C/Y, I/Y, G/Y) and
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Unformatted text preview: labor income shares are more or less constant over time. 3. Write down the F.O.C.’s for the Hodrick-Prescott filter. Write a com-puter code that implements the H-P filtering (i.e., matrix I-A-1 ). 4. Read Cooley and Prescott’s Chapter 1 of Frontiers of Business Cycle Research. Using the post-war quarterly data for U.S. reproduce Table 1.1. (Be mindful about how you treat the seasonality in time series.) Report any anomalies from the “stylized facts of business cycles.” Do this question using each of the following trends. • H-P trend. • Linear trend. • Three-year moving average with equal weights. 1...
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