Beth F. Ingram

Simulation estimation of time-series models

Abstract A formal econometric treatment of the estimation of the parameters of a fully specified stochastic equilibrium model is proposed. The method, estimation by simulation, yields an estimator which is shown to have an asymptotic normal distribution. A goodness-of-fit test based on a chi-square statistic is also derived.

A Bayesian approach to dynamic macroeconomics

Abstract We propose and implement a coherent statistical framework for combining theoretical and empirical models of macroeconomic activity. The framework is Bayesian, and enables the formal yet probabilistic incorporation of uncertainty regarding the parameterization of theoretical models. The approach is illustrated using a neoclassical business-cycle model that builds on the Greenwood et al. (1988, American Economic Review 78, 402–417) variable-utilization framework to study out-of-sample forecasting of output and investment. The forecasts so produced are comparable with those from a Bayesian vector autoregression.

Supplanting the ‘Minnesota’ prior: Forecasting macroeconomic time series using real business cycle model priors

A cooling slot for passing cooling fluid through a heated plate such as an airfoil blade for use in gas turbine engines is created by forming a first plurality of passages within the blade, and then forming a second plurality of passages within the blade, wherein preselected of the passages of the second plurality intersect at least one of the passages of the first plurality to define a number of nodes between the points of intersection. When cooling fluid is passed through the blade, the nodes act as turbulence promoters and area increasers for improving convective heat transfer between the blade and the cooling fluid.

Explaining business cycles: A multiple-shock approach

Abstract Aiyagari (1992) and Prescott (1986, 1991) claim that a large fraction of the variance of United States quarterly detrended real GNP is attributable to an unobservable shock to total factor productivity. This paper argues that the importance of a productivity shock in explaining the variance of output is fundamentally indeterminate. Any model that is in accord with the several time series that make up United States macroeconomic data must feature multiple shocks that are correlated at all leads and lags. Sorting out the separate effects of these various shocks on a single variable such as real GNP is impossible. We illustrate this argument using a multiple-shock version of the King-Plosser-Rebelo (1988) benchmark real business cycle model.

Using theory for measurement: An analysis of the cyclical behavior of home production

Abstract A significant amount of economic activity takes place within the home. Unfortunately, it is difficult to assess the cyclical properties of home production because the available data are too sporadic. Using a real business cycle (RBC) model, we construct quarterly data on three variables that are unobservable at a quarterly frequency: hours worked in the home sector, hours spent in leisure, and the consumption of home-produced goods. Three results emerge: leisure is countercyclical while nonmarket hours are acyclical; hours spent in home production have declined significantly since the 1970s; fluctuations in market output are a good measure of fluctuations in individual utility as long as home and market consumption are either extreme complements or extreme substitutes in the production of utility.

Keynesian Impulses Versus Solow Residuals: Identifying Sources of Business Cycle Fluctuations

We employ a neoclassical business-cycle model to study two sources of business-cycle fluctuations: marginal efficiency of investment shocks, and total factor productivity shocks. The parameters of the model are estimated using a Bayesian procedure that accommodates prior uncertainty about their magnitudes; from these estimates, posterior distributions of the two shocks are obtained. The postwar US experience suggests that both shocks are important in understanding fluctuations, but that total factor productivity shocks are primarily responsible for beginning and ending recessions. Copyright

WELFARE IMPLICATIONS OF FACTOR TAXATION WITH RISING WAGE INEQUALITY

In recent decades, the structure of wages in the U.S. economy has shifted to favor workers with college degrees over those without college degrees. Concurrently, there has been an increase in the share of the workforce that is college educated. We build an overlapping generations model in which skill-biased technological change drives both rising wage inequality and a rising percentage of skilled (educated) workers in the labor force. We explore the implications for agent welfare and for the distribution of income of different factor taxation choices. We find that higher tax rates on capital and lower tax rates on unskilled labor can yield steady-state welfare gains across a heterogeneous population, and that these gains increase as the economy experiences technological change that favors skilled labor. Moreover, these shifts in taxation can lower net wage inequality. Steady-state welfare gains, however, come at the expense of agents alive upon implementation.

Recent Advances in Solving and Estimating Dynamic, Stochastic Macroeconomic Models

Two of the major objectives of macroeconomic research are to explain the behavior of aggregate economic data and to predict the effects of policy interventions. Within the macroeconomics literature, there are two identifiable approaches to these issues. The reduced-form method involves specifying a statistical model for the variables of interest, estimating the parameters of the model, and answering the underlying question by analyzing the estimated values of the parameters or some function of the parameters. The coherence between the model and the data is of primary concern; theory, in general, plays a subordinate role. The structural approach, on the other hand, entails describing a theoretical model for the relevant macroeconomic variables and analyzing the relationships implied by the model to answer the questions of interest. An important feature of the theoretical model is that the parameters of the model be policy invariant; the parameters are structural, remaining fixed under hypothetical interventions. The magnitude of the roles that measurement and observation play in the structural approach have varied greatly over time, being central in the work of the Cowles Commission and, more recently, subsidiary in the real business-cycle (RBC) literature. The point of this essay is to discuss the second approach—the structural program in macroeconomics.

Solving the Stochastic Growth Model by Backsolving with an Expanded Shock Space

I explain how a technique called backsolving is used to find simulated solution paths for a simple economic-growth model. Backsolving can also be applied to generate simulated solution paths for general nonlinear stochastic models.