SSRN Author: Daniel BuncicDaniel Buncic SSRN Content
https://privwww.ssrn.com/author=1771021
https://privwww.ssrn.com/rss/en-usWed, 04 Aug 2021 01:10:07 GMTeditor@ssrn.com (Editor)Wed, 04 Aug 2021 01:10:07 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 signal-to-noise parameter λ(z) which controls the severity of the downward trend in z(t) is unsound. It cannot recover the ratio of interest λ(z) = a_r*σ(z)/σ(˜y) from MUE because of a misspecification in Holston et al.’s (2017) Stage 2 model. Moreover, 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 leads to excessively large estimates of λ(z) when applied to data generated from a model where the true λ(z) is zero. Correcting the misspecification in their Stage 2 model and the implementation of MUE results in a substantially smaller (and highly insignificant) λ(z) point estimate, and thereby a ...
https://privwww.ssrn.com/abstract=3541959
https://privwww.ssrn.com/2047271.htmlTue, 03 Aug 2021 10:05:11 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 signal-to-noise parameter λ(z) which controls the severity of the downward trend in z(t) is unsound. It cannot recover the ratio of interest λ(z) = a_r*σ(z)/σ(˜y) from MUE because of a misspecification in Holston et al.’s (2017) Stage 2 model. Moreover, 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 zero. Correcting the misspecification in their Stage 2 model and the implementation of MUE leads to a substantially smaller (and highly insignificant) λ(z) point estimate, and thereby a ...
https://privwww.ssrn.com/abstract=3541959
https://privwww.ssrn.com/2046670.htmlFri, 30 Jul 2021 18:36:19 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 parameter λ(z) 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 because of an ‘unnecessary’ misspecification in Holston et al.’s (2017) Stage 2 model. Moreover, their implementation of MUE on this ‘unnecessarily’ 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 zero. Correcting the misspecification in their Stage 2 model and the implementation of MUE leads to a substantially smaller (and highly insignificant) λ(z) point estimate, and thereby a more ...
https://privwww.ssrn.com/abstract=3541959
https://privwww.ssrn.com/2017154.htmlFri, 23 Apr 2021 08:38:45 GMTREVISION: On a standard Method for Measuring the Natural Rate of InterestThis paper corrects the implementation of Median Unbiased Estimation (MUE) in Stage 2 of Holston, Laubach and Williams’ (2017) framework to estimate the natural rate of interest and provides corresponding corrected estimates. The correction is quantitatively important. It yields substantially smaller point estimates of the signal-to-noise ratio parameter λ(z) which determines the size of the downward trend of ‘other factor’ z(t) in the natural rate. For US data, the point estimate of λ(z) shrinks from 0.040 to 0.013 and is statistically highly insignificant. For data on the Euro Area, the UK and Canada, the λ(z) point estimates are exactly zero. Natural rate estimates from this model are up to 100 basis points larger than originally computed by Holston et al. (2017).
https://privwww.ssrn.com/abstract=3725151
https://privwww.ssrn.com/2009367.htmlTue, 30 Mar 2021 11:11:37 GMTREVISION: On Measuring the Natural Rate of InterestThis paper provides estimates of the natural rate of interest from Holston, Laubach and Williams’ (2017) structural model which correct the implementation of Median Unbiased Estimation (MUE) in Stage 2 of their framework. The proposed correction is quantitatively important. It yields substantially smaller point estimates of the signal-to-noise ratio parameter λ(z) which determines the size of the downward trend of ‘other factor’ z(t) in the natural rate. For US data, the point estimate of λ(z) shrinks from 0.040 to 0.013 and is statistically highly insignificant. For data on the Euro Area, the UK and Canada, the λ(z) point estimates are zero. These results show that the effect of ‘other factor’ z(t) on the natural rate is considerably smaller than originally estimated by Holston et al. (2017).
https://privwww.ssrn.com/abstract=3725151
https://privwww.ssrn.com/1976689.htmlMon, 04 Jan 2021 10:56:24 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 parameter λ(z) 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 because of an ‘unnecessary’ misspecification in Holston et al.’s (2017) Stage 2 model. Moreover, their implementation of MUE on this ‘unnecessarily’ 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 zero. Correcting the misspecification in their Stage 2 model and the implementation of MUE leads to a substantially smaller (and highly insignificant) λ(z) point estimate, and thereby a more ...
https://privwww.ssrn.com/abstract=3541959
https://privwww.ssrn.com/1973410.htmlFri, 18 Dec 2020 16:46:56 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 parameter λ(z) 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 because of an ‘unnecessary’ misspecification in Holston et al.’s (2017) Stage 2 model. Moreover, their implementation of MUE on this ‘unnecessarily’ 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 zero. Correcting the misspecification in their Stage 2 model and the implementation of MUE leads to a substantially smaller (and highly insignificant) λ(z) point estimate, and thereby a more ...
https://privwww.ssrn.com/abstract=3541959
https://privwww.ssrn.com/1970625.htmlThu, 10 Dec 2020 16:29:02 GMTREVISION: On Measuring the Natural Rate of InterestHolston, Laubach and Williams’ (2017) estimates of the natural rate of interest are based on a misspecified Stage 2 model. This paper corrects the misspecification in their Stage 2 model and provides updated estimates of the natural rate of interest from their model. This correction is quantitatively important. It yields a substantially smaller point estimate of the signal-to-noise ratio parameter λ(z) which determines the size of the downward trend of ‘other factor’ z(t) in the natural rate. For US data, the point estimate of λ(z) shrinks from 0.040 to 0.013 and is statistically highly insignificant. For data on the Euro Area, the UK and Canada, the λ(z) point estimates are zero. These results highlight that the effect of ‘other factor’ z(t) on the natural rate is substantially subdued once Holston et al.’s (2017) estimation procedure is implemented on a correctly specified Stage 2 model, leading to considerably larger estimates of the natural rate of interest from their model.
https://privwww.ssrn.com/abstract=3725151
https://privwww.ssrn.com/1967710.htmlWed, 02 Dec 2020 15:50:52 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 parameter λ(z) 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 because of an ‘unnecessary’ misspecification in Holston et al.’s (2017) Stage 2 model. Moreover, their implementation of MUE on this ‘unnecessarily’ 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 zero. Correcting the misspecification in their Stage 2 model and the implementation of MUE leads to a substantially smaller (and highly insignificant) λ(z) point estimate, and thereby a more ...
https://privwww.ssrn.com/abstract=3541959
https://privwww.ssrn.com/1964566.htmlMon, 23 Nov 2020 11:02:07 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/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 GMT