Several recent studies have expressed concern that the Haar prior typically employed in estimating sign-identified VAR models is driving the prior about the structural impulse responses and hence their posterior. In this paper, we provide evidence that the quantitative importance of the Haar prior for posterior inference has been overstated. How sensitive posterior inference is to the Haar prior depends on the width of the identified set of a given impulse response. We demonstrate that this width depends not only on how much the identified set is narrowed by the identifying restrictions imposed on the model, but also depends on the data through the reduced-form model parameters. Hence, the role of the Haar prior can only be assessed on a case-by-case basis. We show by example that, when the identification is sufficiently tight, posterior inference based on a Gaussian-inverse Wishart-Haar prior provides a reasonably accurate approximation.
最近有几项研究担心，在估计符号识别 VAR 模型时通常采用的 Haar 先验会影响结构脉冲响应的先验，进而影响其后验。在本文中，我们提供了证据，证明 Haar 先验对于后验推断的定量重要性被夸大了。后验推断对 Haar 先验的敏感程度取决于给定脉冲响应的识别集的宽度。我们证明，这一宽度不仅取决于对模型施加的识别限制对识别集的缩小程度，还取决于通过简化形式模型参数得到的数据。因此，只能根据具体情况来评估 Haar 先验的作用。我们通过实例说明，当识别足够严格时，基于高斯逆 Wishart-Haar 先验的后验推断可以提供相当准确的近似值。
{"title":"When is the Use of Gaussian-inverse Wishart-Haar Priors Appropriate?","authors":"Atsushi Inoue, Lutz Kilian","doi":"10.24149/wp2404","DOIUrl":"https://doi.org/10.24149/wp2404","url":null,"abstract":"Several recent studies have expressed concern that the Haar prior typically employed in estimating sign-identified VAR models is driving the prior about the structural impulse responses and hence their posterior. In this paper, we provide evidence that the quantitative importance of the Haar prior for posterior inference has been overstated. How sensitive posterior inference is to the Haar prior depends on the width of the identified set of a given impulse response. We demonstrate that this width depends not only on how much the identified set is narrowed by the identifying restrictions imposed on the model, but also depends on the data through the reduced-form model parameters. Hence, the role of the Haar prior can only be assessed on a case-by-case basis. We show by example that, when the identification is sufficiently tight, posterior inference based on a Gaussian-inverse Wishart-Haar prior provides a reasonably accurate approximation.","PeriodicalId":322311,"journal":{"name":"Federal Reserve Bank of Dallas, Working Papers","volume":"60 5","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141691048","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Lutz Kilian, Michael D. Plante, Alexander W. Richter
{"title":"Online Appendix to Estimating Macroeconomic News and Surprise Shocks","authors":"Lutz Kilian, Michael D. Plante, Alexander W. Richter","doi":"10.24149/wp2304app","DOIUrl":"https://doi.org/10.24149/wp2304app","url":null,"abstract":"","PeriodicalId":322311,"journal":{"name":"Federal Reserve Bank of Dallas, Working Papers","volume":"21 2","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140269364","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"A Narrative Analysis of Federal Appropriations for Research and Development","authors":"Andrew J. Fieldhouse, Karel Mertens","doi":"10.24149/wp2316","DOIUrl":"https://doi.org/10.24149/wp2316","url":null,"abstract":"","PeriodicalId":322311,"journal":{"name":"Federal Reserve Bank of Dallas, Working Papers","volume":"68 3","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139020922","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Oil Price Shocks and Inflation","authors":"L. Kilian, Xiaoqing Zhou","doi":"10.24149/wp2312","DOIUrl":"https://doi.org/10.24149/wp2312","url":null,"abstract":",","PeriodicalId":322311,"journal":{"name":"Federal Reserve Bank of Dallas, Working Papers","volume":"64 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126835061","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Financial Shocks in an Uncertain Economy","authors":"Chiara Scotti","doi":"10.24149/wp2308","DOIUrl":"https://doi.org/10.24149/wp2308","url":null,"abstract":",","PeriodicalId":322311,"journal":{"name":"Federal Reserve Bank of Dallas, Working Papers","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128815326","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Replacing fossil fuels in the name of decarbonization is necessary but will be particularly difficult due to their as-yet unrivaled bundle of attributes: abundance, ubiquity, energy density, transportability and cost. There is a growing commitment to electrification as the dominant decarbonization pathway. While deep electrification is promising for road transportation in wealthy countries, it will face steep obstacles. In other sectors and in the developing world, it’s not even in pole position. Global transportation decarbonization will require decoupling emissions from economic growth, and decoupling emissions from growth will require not only new technologies, but cooperation in governance. The menu of policy options is replete with grim tradeoffs, particularly as the primacy of energy security and reliability (over emissions abatement) has once again been demonstrated in Europe and elsewhere.
{"title":"Global Transportation Decarbonization","authors":"D. Rapson, E. Muehlegger","doi":"10.24149/wp2309","DOIUrl":"https://doi.org/10.24149/wp2309","url":null,"abstract":"Replacing fossil fuels in the name of decarbonization is necessary but will be particularly difficult due to their as-yet unrivaled bundle of attributes: abundance, ubiquity, energy density, transportability and cost. There is a growing commitment to electrification as the dominant decarbonization pathway. While deep electrification is promising for road transportation in wealthy countries, it will face steep obstacles. In other sectors and in the developing world, it’s not even in pole position. Global transportation decarbonization will require decoupling emissions from economic growth, and decoupling emissions from growth will require not only new technologies, but cooperation in governance. The menu of policy options is replete with grim tradeoffs, particularly as the primacy of energy security and reliability (over emissions abatement) has once again been demonstrated in Europe and elsewhere.","PeriodicalId":322311,"journal":{"name":"Federal Reserve Bank of Dallas, Working Papers","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115802453","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"How to Construct Monthly VAR Proxies Based on Daily Futures Market Surprises","authors":"L. Kilian","doi":"10.24149/wp2310","DOIUrl":"https://doi.org/10.24149/wp2310","url":null,"abstract":",","PeriodicalId":322311,"journal":{"name":"Federal Reserve Bank of Dallas, Working Papers","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124897806","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Complementary Currencies and Liquidity: The Case of Coca-Based Money","authors":"Cristian Frasser, Lucie Lebeau","doi":"10.24149/wp2307","DOIUrl":"https://doi.org/10.24149/wp2307","url":null,"abstract":"","PeriodicalId":322311,"journal":{"name":"Federal Reserve Bank of Dallas, Working Papers","volume":"428 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115999561","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We estimate the causal impact of government-funded R&D on business-sector productivity growth. Identification is based on a novel narrative classification of all significant postwar changes in appropriations for R&D funded by five major federal agencies. Using long-horizon local projections and the narrative measures, we find that an increase in appropriations for nondefense R&D leads to increases in various measures of innovative activity, and higher productivity in the long run. We structurally estimate the production function elasticity of nondefense government R&D capital using the SP-IV methodology of Lewis and Mertens (2023)
{"title":"Online Appendix to The Returns to Government R&D: Evidence from U.S. Appropriations Shocks","authors":"Andrew J. Fieldhouse, Karel Mertens","doi":"10.24149/wp2305app","DOIUrl":"https://doi.org/10.24149/wp2305app","url":null,"abstract":"We estimate the causal impact of government-funded R&D on business-sector productivity growth. Identification is based on a novel narrative classification of all significant postwar changes in appropriations for R&D funded by five major federal agencies. Using long-horizon local projections and the narrative measures, we find that an increase in appropriations for nondefense R&D leads to increases in various measures of innovative activity, and higher productivity in the long run. We structurally estimate the production function elasticity of nondefense government R&D capital using the SP-IV methodology of Lewis and Mertens (2023)","PeriodicalId":322311,"journal":{"name":"Federal Reserve Bank of Dallas, Working Papers","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122125752","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The rise of inflation in 2021 and 2022 surprised many macroeconomists who ignored the earlier surge in money growth because past instability in the demand for simple-sum monetary aggregates had made these aggregates unreliable indicators. We find that the demand for more theoretically-based Divisia aggregates can be modeled and that their growth rates provide useful information for future nominal GDP growth. Unlike M2 and Divisia-M2, whose velocities do not internalize shifts in liabilities across commercial and shadow banks, the velocities of broader Divisia monetary aggregates are more stable and can be reasonably empirically modeled in both the short run and the long run through the COVID-19 pandemic and to date. In the long run, these velocities depend on regulatory changes and mutual fund costs that affect the substitutability of money for other financial assets. In the short run, we control for swings in mortgage activity and use vaccination rates and an index of the stringency of government pandemic restrictions to control for the unusual effects of the pandemic. The velocity of broad Divisia money temporarily declines during crises like the Great and COVID Recessions, but later rebounds. In each recession monetary policy lowered short-term interest rates to zero and engaged in quantitative easing of about $4 trillion. Nevertheless, broad money growth was more robust in the COVID Recession, likely reflecting that the banking system was less impaired and could promote rather than hinder multiple deposit creation. Partly as a result, our framework implies that nominal GDP growth and inflationary pressures rebounded much more quickly from the COVID Recession versus the Great Recession. We consider different scenarios for future Divisia money growth and the unwinding of the pandemic that have different implications for medium-term nominal GDP growth and inflationary pressures as monetary policy tightening seeks to restore low inflation.
{"title":"Money Matters: Broad Divisia Money and the Recovery of Nominal GDP from the COVID-19 Recession","authors":"Michael D. Bordo, John V. Duca","doi":"10.24149/wp2306","DOIUrl":"https://doi.org/10.24149/wp2306","url":null,"abstract":"The rise of inflation in 2021 and 2022 surprised many macroeconomists who ignored the earlier surge in money growth because past instability in the demand for simple-sum monetary aggregates had made these aggregates unreliable indicators. We find that the demand for more theoretically-based Divisia aggregates can be modeled and that their growth rates provide useful information for future nominal GDP growth. Unlike M2 and Divisia-M2, whose velocities do not internalize shifts in liabilities across commercial and shadow banks, the velocities of broader Divisia monetary aggregates are more stable and can be reasonably empirically modeled in both the short run and the long run through the COVID-19 pandemic and to date. In the long run, these velocities depend on regulatory changes and mutual fund costs that affect the substitutability of money for other financial assets. In the short run, we control for swings in mortgage activity and use vaccination rates and an index of the stringency of government pandemic restrictions to control for the unusual effects of the pandemic. The velocity of broad Divisia money temporarily declines during crises like the Great and COVID Recessions, but later rebounds. In each recession monetary policy lowered short-term interest rates to zero and engaged in quantitative easing of about $4 trillion. Nevertheless, broad money growth was more robust in the COVID Recession, likely reflecting that the banking system was less impaired and could promote rather than hinder multiple deposit creation. Partly as a result, our framework implies that nominal GDP growth and inflationary pressures rebounded much more quickly from the COVID Recession versus the Great Recession. We consider different scenarios for future Divisia money growth and the unwinding of the pandemic that have different implications for medium-term nominal GDP growth and inflationary pressures as monetary policy tightening seeks to restore low inflation.","PeriodicalId":322311,"journal":{"name":"Federal Reserve Bank of Dallas, Working Papers","volume":"51 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126815325","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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