investment specific technological changes the source of long run tfp fluctuations abstract technological innovations originating in the capital producing sector may spillover to the rest of the economy and enhance aggregate tfp in the long run this paper assesses the quantitative importance of investment specific technological changes in long run movements in aggregate tfp to this end we construct a two sector business cycle model where an ist diffusion process influences long run movements in aggregate tfp via spillover we then establish the linkage between the primitive shocks of the model and two shocks that can be identified from a var approach one shock accounting for the long run movement in aggregate tfp and the other accounting for the long run movement in the inverse of the relative price of investment we show analytically that the correlation of these two long run shocks can be fruitful in distinguishing the quantitative importance of ist innovations in long run movements in aggregate tfp using post war u s data we find that these two long run shocks identified by the mfev approach are almost perfectly collinear moreover these two shocks can explain a significant and surprisingly similar fraction of the business cycle fluctuations in other important macro variables our findings suggest that embodied technological changes are an important driver of long run movements in aggregate tfp

when do long run identifying restrictions give reliable results many recent articles have identified behavioral disturbances in vector autoregressions by imposing restrictions on the long run effects of shocks this article demonstrates that this approach will be unreliable unless the underlying economy satisfies three types of strong restrictions although many aspects of these issues have been raised before this article draws out and illustrates the implications for inferences under the long run scheme furthermore it provides strategies for dealing with the problems

news sovereign debt maturity and default risk abstract leading into a debt crisis interest rate spreads on sovereign debt rise before the economy experiences a decline in productivity suggesting that news about future economic developments may play an important role in these episodes an empirical var estimation shows that a news shock has a larger contemporaneous impact on sovereign credit spreads than a comparable shock to labor productivity a quantitative model of news and sovereign debt default with endogenous maturity choice generates impulse responses and a variance decomposition similar to the empirical var estimates the dynamics of the economy after a bad news shock share some features of a productivity shock and some features of sudden stop events however unlike during sudden stop episodes long term debt does not shield the country from bad news shocks and it may even exacerbate default risk finally an increase in the precision of news allows the government to improve its debt maturity management especially during periods of high stress in credit markets and thus face lower yield spreads while increasing the amount of debt

revisions in utilization adjusted tfp and robust identification of news shocks this paper documents large revisions in a widely used series of utilization adjusted total factor productivity tfp by fernald 2014 and shows that these revisions can materially affect empirical

economic determinants of the nominal treasury yield curve abstract macroeconomic shocks account for most of the variability of nominal treasury yields inducing parallel shifts in the level of the yield curve we develop a new approach to identifying macroeconomic shocks that exploits model based empirical shock measures technology shocks shift yields through their effect on expected inflation and the term premium shocks to preferences for current consumption affect yields through their impact on real rates and expected inflation for both shocks the systematic reaction of monetary policy is an important transmission pathway we find little evidence that fiscal policy shocks are an important source of interest rate variability

estimating the peace dividend the impact of violence on house prices in northern ireland this article exploits data on the pattern of violence across regions and over time to estimate the impact of the peace process in northern ireland on house prices after establishing a negative correlation between killings and house prices we estimate the parameters of a markov switching model with conflict and peace as latent states we use the model to estimate the size of the peace dividend as captured in house price changes jel d74 r23 r31 conflict in ireland has a long history even after the republic of ireland was created as an independent state in 1920 the status of the mainly protestant north remained contested from the late 1960s a violent conflict flared up which claimed around 3 500 lives only more than two decades later from 1993 onwards emerged a peace process which while initially fragile culminated in a cessation of violence and a return to devolved government by 2007 the conflict was a major source of social and economic dislocation but as peace took hold this has begun to be repaired this paper assesses the impact of peace by using variation in violence within northern ireland to study one important economic aspect of the peace process and the dividend that it brought to residents of northern ireland the impact on house prices houses are assets whose prices reflect the present and future expected attrac tiveness of living in an area even during the height of the conflict in northern ireland violence was not uniform for example belfast the capital city of the province of northern ireland was particularly hard hit looking for economic consequences of the peace process we would therefore expect benefits to be concentrated among areas where violence was most prevalent we exploit within region variability in violence and house prices over time having such variation is rare in studies of the economic consequences of conflict our specific measure of violence is conflict related deaths these have been well documented by sutton 1994 and the conflict archive on the

new keynesian macroeconomics and the term structure this article complements the structural new keynesian macro framework with a no arbitrage affine term structure model whereas our methodology is general we focus on an extended macro model with an unobservable time varying inflation target and the natural rate of output which are filtered from macro and term structure data we obtain large and significant estimates of the phillips curve and real interest rate response parameters our model also delivers strong contemporaneous responses of the entire term structure to various macroeconomic shocks the inflation target dominates the variation in the level factor whereas the monetary policy shocks dominate the variation in the slope and curvature factors

intra household nutritional inequities in rural bangladesh abstractusing novel data from rural bangladesh reporting individual level food consumption and anthropometric measures we find substantial inequities in the intrahousehold distribution of calories

news shocks and the slope of the term structure of interest rates abstract we adopt a statistical approach to identify the shocks that explain most of the fluctuations of the slope of the term structure of interest rates we find that one shock can explain the majority of unpredictable movements in the slope impulse response functions lead us to interpret this shock as news about future total factor productivity tfp by showing that slope shocks are essentially tfp news shocks we provide a new explanation for the relationship between the slope and macroeconomic fundamentals our results also provide a new empirical benchmark for structural models at the intersection of macroeconomics and finance jel e23 e43 e52 g12 g14

identifying fiscal inflation abstract fiscal theorists warn about the risk of future inflation as a consequence of fiscal imbalances in the us because actual inflation remains historically low and data on inflation expectations do not corroborate such risks warnings for fiscal inflation are often ignored in policy and academic circles this paper shows that a canonical nk dsge model enables identifying an anticipated component of inflation expectations that is closely related to fiscal policy estimation results suggest that fiscal inflation concerns have induced a 1 6 points increase in long run inflation since 2001 the model also rationalizes why data on inflation expectations do not reveal such concerns outright

news shocks and the slope of the term structure of interest rates comment abstract kurmann and otrok 2013 establish that the effects on economic activity from news on future productivity growth are similar to the effects from unexpected changes in the slope of the yield curve this comment shows that these results become substantially weaker in the light of a recent update in the utilization adjusted total factor productivity series produced by fernald 2014 jel e23 e32 e43 e52 g12

the long run phillips curve a structural var investigation both cointegration methods and non cointegrated structural vars identified based on either long run restrictions or a combination of long run and sign restrictions are used in order to explore the long run trade off between inflation and the unemployment rate in the post wwii u s u k euro area canada and australia overall neither approach produces clear evidence of a non vertical trade off the extent of uncertainty surrounding the estimates is however substantial thus implying that a researcher holding alternative priors about what a reasonable slope of the long run trade off might be will likely not see her views falsified

sticky wages and sectoral labor comovement abstract a defining feature of business cycles is the comovement of inputs at the sectoral level with aggregate activity standard models cannot account for this phenomenon this paper develops and estimates a two sector dynamic general equilibrium model that can account for this key regularity my model incorporates three shocks to the economy monetary policy shocks neutral technology shocks and embodied technology shocks in the capital producing sector the estimated model is able to account for the response of the u s economy to all three shocks using this model i argue that the key friction underlying sectoral comovement is rigidity in nominal wages

fiscal foresight and information flows news or foresight about future economic fundamentals can create rational expectations equilibria with non fundamental representations that pose substantial challenges to econometric efforts to recover the structural shocks to which economic agents react using tax policies as a leading example of foresight simple theory makes transparent the economic behavior and information structures that generate non fundamental equilibria econometric analyses that fail to model foresight will obtain biased estimates of output multipliers for taxes biases are quantitatively important when two canonical theoretical models are taken as data generating processes both the nature of equilibria and the inferences about the effects of anticipated tax changes hinge critically on hypothesized information flows different methods for extracting or hypothesizing the information flows are discussed and shown to be alternative techniques for resolving a non uniqueness problem endemic to moving average representations

stochastic technical progress smooth trends and nearly distinct business cycles this paper studies a model of random technical progress where technology diffuses at realistically slow rates it fits smooth trends to the sum of gdp series generated by this model and series representing transitory or cyclical fluctuations detrended gdp is then largely unrelated to technical progress the detrending method proposed by rotemberg 1999 reconstructs cyclical variations somewhat more accurately than the hp filter with sufficiently slow diffusion it is also more accurate than a method based on vars fitted to hours and gdp growth consistent with the model s predictions permanent shocks initially depress both hours and output in these vars

poverty and witch killing many observers have noted that poverty and violence go hand in hand there is a strong negative relationship between economic growth and crime across countries as well as across districts in india and a link between low income and the occurrence of civil war 1 yet existing studies are typically unable to resolve the key econometric identification issues of omitted variable bias and endogeneity to illustrate the unobserved quality of local government institutions may affect both income growth and crime rates and poverty could lead to violence if desperate people with nothing to lose commit more crimes but violence itself may in turn affect economic productivity this paper uses local rainfall variation to identify the impact of income shocks on murder in a rural tanzanian district 2 extreme rainfall resulting in drought or floods is exogenous and is associated with poor harvests and near famine conditions in the region and a large increase in the murder of witches there are twice as many witch murders in years of extreme rainfall as in other years the victims are nearly all elderly women typically killed by relatives these econometric results across 11 years in 67 villages provide novel evidence on the role of income shocks in causing violent crime and religious violence in particular and also provide insights into witchcraft an important social phenomenon in africa rarely studied by economists the view that economic conditions are a driving force behind witch murders is bolstered by the fact that most witch killing in tanzania takes place in poor rural areas largely dependent on rain fed agriculture and that most victims in our sample are from poor households however it is difficult to definitively disentangle this income shock theory from alternative socio cultural explanations the concentration of tanzanian witch murders in a region dominated by one particular ethnic group the sukuma and the especially high number of witch murders in villages where indigenous religious beliefs are strong both point to the important role of non economic factors economic theories and cultural theories are perhaps best viewed as complements the empirical findings demonstrate the power of economics to rationalize a phenomenon that has previously been understood almost solely through a socio cultural lens 3

food insecurity in vulnerable populations coping with food price shocks in afghanistan we use the case of afghanistan during the 2007 08 food price crisis to illustrate the impact of staple food price increases on household food security using the unconditional quantile regression estimator to identify separate effects for households across the distribution we find evidence of divergent behavior the most vulnerable households with low calorie diets cannot afford to make substantial cuts to caloric intake since they are close to or below the minimum daily energy requirements accordingly we find no decline in per capita daily caloric intake as a result of the price increases such households may be sacrificing diet quality to maintain calories with a potential for serious and long term health consequences households with high calorie diets who can afford to cut back on calories experience the largest declines we find evidence of declines in dietary diversity across the entire distribution of households with slightly larger declines observed for those with the least diversity moving beyond the price responses for the average household can inform policy makers of how the most vulnerable groups are affected such information is particularly salient in a country like afghanistan where decades of war political instability and recurring droughts have led to a precarious state of food insecurity and poverty

news driven business cycles insights and challenges there is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations the news view of business cycles offers a formalization of this perspective in this paper we discuss mechanisms by which changes in agents information due to the arrival of news can cause business cycle fluctuations driven by expectational change and we review the empirical evidence aimed at evaluating their relevance in particular we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations while at the same time we emphasize the many challenges that must be addressed before a proper assessment of the role of news in business cycles can be established jel d83 d84 e13 e32 o33

a macro finance model of the term structure monetary policy and the economy this paper develops and estimates a macro finance model that combines a canonical affine no arbitrage finance specification of the term structure with standard macroeconomic aggregate relationships for output and inflation from this new empirical formulation we obtain several interesting results 1 the latent term structure factors from finance no arbitrage models appear to have important macroeconomic and monetary policy underpinnings 2 there is no evidence of monetary policy inertia or a slow partial adjustment of the policy interest rate by the federal reserve and 3 both forward looking and backward looking elements play important roles in macroeconomic dynamics

rising food prices and coping strategies household level evidence from afghanistan this paper investigates the impact of rising wheat prices on household food security in afghanistan exploiting a unique nationally representative household survey the authors find evidence of large declines in the real value of per capita food consumption smaller price elasticities with respect to calories than with respect to food consumption suggest that households trade off quality for quantity as they move away from nutrient rich foods such as meat and vegetables toward staple foods the authors work improves upon country level simulation studies by providing estimates of actual household food security during a price shock in one of the world s poorest most food insecure countries

news shocks and business cycles abstract this paper proposes and implements a novel structural var approach to the identification of news shocks about future technology the news shock is identified as the shock orthogonal to the innovation in current utilization adjusted tfp that best explains variation in future tfp a favorable news shock leads to an increase in consumption and decreases in output hours and investment on impact more suggestive of standard dsge models than of recent extensions designed to generate news driven business cycles though news shocks account for a significant fraction of output fluctuations at medium frequencies they contribute little to our understanding of recessions

a structural decomposition of the us yield curve abstract by expanding the macro part of macro finance models historical fluctuations in us bond yields turn out to be largely consistent with the rational expectations hypothesis we estimate a medium scale macro finance dsge model of the term structure to establish this our finding contrasts with existing macro finance models and suggests that their small scale or non structural perspective on the macroeconomy mutes expectations thereby underestimating the expectations hypothesis potential out of sample forecasts are competitive with more flexible term structure models given the empirical validation we interpret various episodes through the lens of the model and investigate which structural shocks cause the yield curve to contain information about future growth

the yield curve and the macro economy across time and frequencies this paper assesses the relation between the yield curve and the main macroeconomic variables in the u s between early 1960s and 2009 across time and frequencies using wavelet analyses the shape of the yield curve is modelled by latent factors corresponding to its level slope and curvature estimated by maximum likelihood with the kalman filter the macroeconomic variables measure economic activity unemployment inflation and the fed funds rate the cross wavelet tools employed coherency and phase difference the set of variables and the length of the sample allow for a thorough appraisal of the timevariation and structural breaks in the direction intensity synchronization and periodicity of the relation between the yield curve and the macro economy our evidence establishes a number of new stylized facts on the yield curve macro relation and sheds light on several results found in the literature which could not have been achieved with analyses conducted strictly in the time domain as most of the literature or purely in the frequency domain

bond yields and the federal reserve bond yields respond to policy decisions by the federal reserve and vice versa to learn about these responses i model a high frequency policy rule based on yield curve information and an arbitrage free bond market in continuous time the fed s target is a pure jump process jump intensities depend on the state of the economy and the meeting calendar of the federal open market committee the model has closed form solutions for yields as functions of a few state variables introducing monetary policy helps to match the whole yield curve because the target is an observable state variable that pins down its short end and introduces important seasonalities around fomc meetings the volatility of yields is snake shaped which the model explains with policy inertia the policy rule crucially depends on the two year yield and describes fed policy better than taylor rules

diamonds are forever wars are not is conflict bad for private firms this paper studies the relationship between civil war and the value of firms in a poor resource abundant country using microeconomic data for angola we focus on diamond mining firms and conduct an event study on the sudden end of the conflict marked by the death of the rebel movement leader in 2002 we find that the stock market perceived this event as bad news rather than good news for companies holding concessions in angola as their abnormal returns declined by 4 percentage points the event had no effect on a control portfolio of otherwise similar diamond mining companies this finding is corroborated by other events and by the adoption of alternative methodologies we interpret our findings in light of conflict generated entry barriers government bargaining power and transparency in the licensing process jel d74 g32 o13 o17 q34

on the sources of information about latent variables in dsge models abstract latent variables are ubiquitous in macroeconomics and structural models are often used to characterize and estimate them from empirical data this paper addresses the problem of identifying the key sources of information with respect to latent variables in dynamic stochastic general equilibrium models to that end i show how to evaluate the information content of a set of observable variables with respect to a given latent variable the methodology enables researchers to measure and compare the informational contribution of different observables and identify the most informative ones thus it provides a framework for a rigorous treatment of such issues which are often discussed in an informal manner in the literature the methodology is illustrated with an assessment of the informational importance of asset prices with respect to news shocks in the business cycle model developed by schmitt grohe and uribe 2012

explorations into factors explaining money market returns in this article we measure and interpret the common factors that describe money market returns results are presented for both three and four factor models we find that the three factor model explains on average 86 percent of the total variation in most money market returns while the four factor model explains on average 90 percent of this variation using mimicking portfolios we provide an interpretation of the systematic risks represented by these factors in this article we attempt to measure and interpret the common factors that describe money market returns the factor approach we employ assumes that the covariance matrix of a set of random variables in this case excess returns can be decomposed into common or systematic components and idiosyncratic or nonsystematic components this decomposition into systematic and nonsystematic components is based on an assumption of a linear relationship between the returns of each security and a set of common factors this is the assumption of linear return generating models which form an integral part of the structure of many asset pricing theories for example arbitrage pricing theory apt as developed by ross 1976 the interpretation is that the common factors represent sources of systematic or nondiversifiable risk and the idiosyncratic component of returns represents diversifiable risks our focus here is not on testing a particular asset pricing model per se but on developing empirical evidence for the existence of stylized facts regarding money market returns the stylized facts take the form of the existence measurement and interpretation of the common factors that are found in money markets our attempt to measure and interpret these sources of systematic risk may eventually lead to the construction of observable eco

the dynamic effects of neutral and investment specific technology shocks the neoclassical growth model is used to identify the short run effects of neutral technology shocks which affect the production of all goods homogeneously and investment specific shocks which affect only investment goods the real equipment price crucial for identifying the investment shocks experiences an abrupt increase in its average rate of decline in 1982 so the analysis is based on a split sample on the basis of the preferred specification the two technology shocks account for 73 percent of hours and 44 percent of output s business cycle variation before 1982 and 38 percent and 80 percent afterward the shocks also account for more than 40 percent of hours and 58 percent of output s forecast errors over a three to eight year horizon in both samples the majority of these effects are driven by the investment shocks

when rebels attack quantifying the impacts of capturing territory from the government in yemen households were adversely affected by the mostly nonviolent capture of yemen s capital in 2014 although socioeconomically advantaged households were initially better able to cope with the shock th

on the term structure of interest rates abstract this paper tests the one good stochastic growth model with respect to its ability to explain the term structure of real interest rates we undertake both a qualitative and quantitative analysis first we assess the changing shape of the yield curve over the model economy s business cycle and compare our results with what is empirically observed second we employ the model to study various implications of informational and allocative efficiency properties which the artificial economy must possess it is found for example that long term rates are less volatile than short term rates and that holding premia can be highly correlated over time third we study the time varying risk premium implicit in the economy s forward rate structure a purely quantitative assessment of the model s explanatory power is also provided

the term structure of interest rates in real and monetary economies abstract this paper modifies standard asset pricing models by introducing capital a variable labor supply and money a surprising but very positive result is that in a real production economy the interest rate is close to a random walk this result is found to be true even if there is no persistence in the driving process of the model in this paper we generalize the standard cash in advance constraint by using a shopping time technology this generalization makes it possible to match observed variability for the velocity of money this type of monetary model however is not successful in matching observed behavior of bond prices