TIME SERIES REGRESSION NOTES
Time series regression analysis is tricky! Be careful and dont generate spurious results.
1. Transform all variables (both dependent variable and explanatory variables) to
Credit Crunches, Deleveraging and the
Zero Lower Bound
Standard NK model
Euler equation with discount factor shock qt
Et ct+1 ct =
1
(it Et t+1 + qt )
Calvo pricing frictions:
t = Et (t+1 ) + ct
Di
Miscellaneous Classification Topics
Oversampling
When classes are present in very different proportions as in 2% success (1) and 98% failure (0)
and in the case that the benefits of identifying a succ
Real Rigidities
NK models vs. Data
Data: long-lived eects from monetary shocks
half-life = 10 quarters
Models: half-life 1/2 - 2/3 average price durations
E.g. Calvo with = prob. of not changing pri
3
Segmented Markets
Standard monetary models (cash-in-advance, money in utility function) imply, counterfactually,
that a persistent increase in the money supply increases nominal interest rates since
7
Innovation, Technology Adoption and Firm Dynamics
7.1
Parente (JET, 1994)
Studies economy in which rms choose the timing of a technology adoption. Adopting a better
technology entails a) a xed cost
4
Misallocation
We study models in which wedges in the rms Euler equations for hiring capital/labor generate aggregate TFP losses. We study two mechanisms that generate such wedges: i) heterogeneity i
1
Economies with Fixed Price Adjustment Costs
A widely held view in macroeconomics is that changes in monetary policy (or more broadly
nominal, nancial and demand shocks) have eects on real activity b
1
Firm Dynamics
We next extend the tools we have learned to an environment in which heterogeneity is on
the rm side. In particular, we extend the equilibrium concept we used above to allow
for rm entr