Edward P. Herbst. In likelihood-based estimation of linearized Dynamic Stochastic General Equilibrium (DSGE) models, the evaluation of the Kalman Filter dominates the running time of the entire algorithm. In this paper, we revisit a set of simple recursions known as the ``Chandrasekhar Recursions" developed by Morf (1974) and Morf, Sidhu, and Kalaith (1974) for evaluating the likelihood of a Linear Gaussian State Space System. We show that DSGE models are ideally suited for the use of these recursions, which work best when the number of states is much greater than the number of observables. In several examples, we show that there are substantial benefits to using the recursions, with likelihood evaluation up to five times faster. This gain is especially pronounced in light of the trivial implementation costs--no model modification is required. Moreover, the algorithm is complementary with other approaches.
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Jonathan N. Millar, Stephen D. Oliner, and Daniel E. Sichel. We use a large project-level dataset to estimate the length of the planning period for commercial construction projects in the United States. We find that these time-to-plan lags are long, av...
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Valentin Bolotnyy. The U.S. mortgage crisis that began in 2007 generated questions about the role played by Fannie Mae and Freddie Mac, the Government-Sponsored Enterprises (GSEs), in its causes. Some have claimed that the Affordable Housing Goals (AHG...
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Alex Haberis and Anna Lipinska. In this paper, we consider how monetary policy in a large, foreign economy affects optimal monetary policy in a small open economy (`home') in response to a large global demand shock that pushes both economies to the zer...
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Morten L. Bech, Elizabeth Klee, and Viktors Stebunovs. This paper examines the link between the federal funds and repo markets, before, during, and emerging from the financial crisis that began in August
2007. In particular, the paper investigates the...
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Published:May 14, 2012
Editor's note: Check out the crowd at a concert, a movie, a school play, a beach—heck, even a funeral—and you'll likely see several people sneaking prolonged peeks at their smartphones. They just can't help themse...
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William F. Bassett, Mary Beth Chosak, John C. Driscoll, and Egon Zakrajsek. Identifying the macroeconomic effects of credit supply disruptions is difficult because many of the same factors that influence the supply of bank loans can also affect the dem...
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Alex Kaufman. This paper uses a novel instrumental variables approach to quantify the effect that GSE purchase eligibility had on equilibrium mortgage loan terms in the period from 2003 to 2007. The technique is designed to eliminate sources of bias that may have affected previous studies. GSE eligibility appears to have lowered interest rates by about 10 basis points, encouraged fixed-rate loans over ARMs, and discouraged low-documentation and brokered loans. There is no measurable effect on loan performance or on the prevalence of certain types of "exotic" mortgages. The overall picture suggests that GSE purchases had only a modest impact on loan terms during this period.
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Marcelle Chauvet and Zeynep Senyuz. In this paper, we propose an econometric model of the joint dynamic relationship between the yield curve and the economy to predict business cycles. We examine the predictive value of the yield curve to forecast futu...
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Jonathan D. Rose. This paper studies how building and loan associations (B&Ls) slowly unwound their obligations following a set of financial shocks during the Great Depression, with a special focus on a group of particularly troubled B&Ls in Newark, NJ...
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Uncategorized Tags: building, Depression, foreclosed real estate, Jonathan D. Rose, losses, Newark, NJ., Prolonged, Resolution, Troubled Real Estate Lenders, withdrawal
