Research Rap

Business Review (Federal Reserve Bank of Philadelphia), Summer 2006 | Go to article overview

Research Rap


Abstracts of research papers produced by the economists at the Philadelphia Fed

THE EQUITY PREMIUM AND RETURN ON ASSETS

Recent empirical work documents a decline in the U.S. equity premium and a decline in the standard deviation of real output growth. The author investigates the link between aggregate risk and the asset returns in a dynamic production-based asset-pricing model. When calibrated to match asset return moments, the model implies that the post-1984 reduction in TFP shock volatility of 60 percent gives rise to a 40 percent decline in the equity premium. Lower macroeconomic risk post-1984 can account for a substantial fraction of the decline in the equity premium.

Working Paper 06-1, "Macroeconomic Volatility and the Equity Premium" Keith Sill, Federal Reserve Bank of Philadelphia

EXPLORING THE DYNAMICS OF PREDATORY LENDING

Regulators express growing concern over "predatory lending," which the authors take to mean lending that reduces the expected utility of borrowers - They present a rational model of consumer credit in which such lending is possible and identify the circumstances in which it arises with and without competition. Predatory lending is associated with imperfect competition, highly collateralized loans, and poorly informed borrowers. Under most circumstances competition among lenders eliminates predatory lending.

Working Paper 06-2, "Predatory Lending in a Rational World" Philip Bond, The Wharton School, University of Pennsylvania, and Visiting Scholar, Federal Reserve Bank of Philadelphia; David K. Musto, The Wharton School, University of Pennsylvania; and Bilge Yilmaz, The Wharton School, University of Pennsylvania

DEVELOPING EMPIRICALLY VIABLE MODELS

The time series fit of dynamic stochastic general equilibrium (DSGE) models often suffers from restrictions on the long-run dynamics that are at odds with the data. Relaxing these restrictions can close the gap between DSGE models and vector autoregressions. This paper modifies a simple stochastic growth model by incorporating permanent labor supply shocks that can generate a unit root in hours worked. Using Bayesian methods the authors estimate two versions of the DSGE model: the standard specification in which hours worked are stationary and the modified version with permanent labor supply shocks. They find that the data support the latter specification.

Working Paper 06-3, "Non-Stationary Hours in a DSGE Model" Yongsung Chang, Seoul National University; Taeyoung Doh, University of Pennsylvania; and Frank Schorfheide, University of Pennsylvania, CEPR and Visiting Scholar, Federal Reserve Bank of Philadelphia

POLICY ANALYSIS AND POTENTIALLY MISSPECIFIED MODELS

This paper proposes a novel method for conducting policy analysis with potentially misspecified dynamic stochastic general equilibrium (DSGE) models and applies it to a New Keynesian DSGE model along the lines of Christiano, Eichenbaum, and Evans (JPE 2005) and Smets and Wouters (JEEA 2003). The authors first quantify the degree of model misspecification and then illustrate its implications for the performance of different interest-rate feedback rules. The authors find that many of the prescriptions derived from the DSGE model are robust to model misspecification.

Working Paper 06-4, "Monetary Policy Analysis with Potentially Misspecified Models," Marco Del Negro, Federal Reserve Bank of Atlanta, and Frank Schorfheide, University of Pennsylvania, and Visiting Scholar, Federal Reserve Bank of Philadelphia

REVIEWING ESTIMATION AND EVALUATION TECHNIQUES IN DSGE MODELS

This paper reviews Bayesian methods that have been developed in recent years to estimate and evaluate dynamic stochastic general equilibrium (DSGE) models. The authors consider the estimation of linearized DSGE models, the evaluation of models based on Bayesian model checking, posterior odds comparisons, and comparisons to vector autoregressions, as well as the nonlinear estimation based on a second-order accurate model solution. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Research Rap
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.