SSRN Author: Daniel BuncicDaniel Buncic SSRN Content
https://privwww.ssrn.com/author=1771021
https://privwww.ssrn.com/rss/en-usSat, 08 Aug 2020 01:07:48 GMTeditor@ssrn.com (Editor)Sat, 08 Aug 2020 01:07:48 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0REVISION: Econometric Issues with Laubach and Williams’ Estimates of the Natural Rate of InterestHolston, Laubach and Williams’ (2017) estimates of the natural rate of interest are driven by the downward trending behaviour of ‘other factor’ z(t). I show that their implementation of Stock and Watson’s (1998) Median Unbiased Estimation (MUE) to determine the size of the λ(z)parameter which drives this downward trend in z(t) is unsound. It cannot recover the ratio of interest λ(z) =a_r*σ(z)/σ(˜y) from MUE required for the estimation of the full structural model. This failure is due to an ‘unnecessary’ misspecification in Holston et al.’s (2017) formulation of the Stage 2 model. More importantly, their implementation of MUE on this misspecified Stage 2 model spuriously amplifies the point estimate of λ(z). Using a simulation experiment, I show that their procedure generates excessively large estimates of λ(z) when applied to data generated from a model where the true λ(z) is equal to zero. Correcting the misspecification in their Stage 2 model and the implementation of MUE leads to ...
https://privwww.ssrn.com/abstract=3541959
https://privwww.ssrn.com/1929550.htmlFri, 07 Aug 2020 08:22:18 GMTREVISION: Econometric Issues with Laubach and Williams’ Estimates of the Natural Rate of InterestHolston, Laubach and Williams’ (2017) estimates of the natural rate of interest are driven by the downward trending behaviour of ‘other factor’ z(t). I show that their implementation of Stock and Watson’s (1998) Median Unbiased Estimation (MUE) to determine the size of the λ(z)parameter which drives this downward trend in z(t) is unsound. It cannot recover the ratio of interest λ(z) =a_r*σ(z)/σ(˜y) from MUE required for the estimation of the full structural model. This failure is due to an ‘unnecessary’ misspecification in Holston et al.’s (2017) formulation of the Stage 2 model. More importantly, their implementation of MUE on this misspecified Stage 2 model spuriously amplifies the point estimate of λ(z). Using a simulation experiment, I show that their procedure generates excessively large estimates of λ(z) when applied to data generated from a model where the true λ(z) is equal to zero. Correcting the misspecification in their Stage 2 model and the implementation of MUE leads to ...
https://privwww.ssrn.com/abstract=3541959
https://privwww.ssrn.com/1928990.htmlThu, 06 Aug 2020 08:17:59 GMTREVISION: Econometric Issues with Laubach and Williams’ Estimates of the Natural Rate of InterestHolston, Laubach and Williams’ (2017) estimates of the natural rate of interest are driven by the downward trending behaviour of ‘other factor’ z(t) . I show that their implementation of Stock and Watson’s (1998) Median Unbiased Estimation (MUE) to determine the size of λ(z) is unsound. It cannot recover the ratio of interest λ(z) = a_r σ(z) / σ(y~) from MUE required for the estimation of the full structural model. This failure is due to their Stage 2 model being incorrectly specified. More importantly, the MUE procedure that they implement spuriously amplifies the estimate of λ(z). Using a simulation experiment I show that their MUE procedure generates excessively large estimates of λ(z) when applied to data simulated from a model where the true λ(z) is equal to zero. Correcting their Stage 2 MUE procedure leads to a substantially smaller estimate of λ(z) and a more subdued downward trending influence of ‘other factor’ z(t) on the natural rate. This correction is quantitatively ...
https://privwww.ssrn.com/abstract=3541959
https://privwww.ssrn.com/1878243.htmlMon, 23 Mar 2020 20:35:22 GMT