Existing specification tests for conditional heteroskedasticity are derived under the assumption that the density of the innovation, or standardized error, is Gaussian, despite the fact that many recent empirical studies provide evidence that this density is not Gaussian. We obtain specification...

Classical and Bayesian unit root test procedures are reviewed, with an emphasis on testing principles and recent developments. A numerical illustration and annotated references and bibliography are provided. Classification-JEL: C22

Impulse response and forecast error variance matrix asymptotics are developed for VAR models with some roots at or near unity and some cointegration. For such models, it is shown that impulse responses that are estimated from an unrestricted VAR are inconsistent at long horizons and tend to...

This paper reports quarterly ex ante forecasts of macroeconomic activity for the U.S.A., Japan and Australia for the period 1995-1997. The forecasts are based on automated time series models of vector autoregressions (VAR's), reduced rank regressions (RRR's), error correction models (ECM's) and...

We propose a nonparametric test of conditional independence based on the empirical distribution function. The asymptotic null distribution is a mixture of chi-squares. A bootstrap procedure is proposed for calculating the critical values. Our test has power against alternatives at distance...

This paper examines monetary policy from an optimal control perspective. Three loss functions are minimized for each of three models, and the results are compared. The three loss functions target nominal growth, real growth, and inflation, respectively. The three models are a small structural...

Evidence is shown, using US foreclosure data by state 1975-93, that periods of high default rates on home mortgages strongly tend to follow real estate price declines or interruptions in real estate price increase. The relation between price decline and foreclosure rates is modelled using a...

This paper is intended to be a chapter in a forthcoming "Second Edition" of John Maynard Keynes, The General Theory of Employment, Interest and Money, published in one single edition in 1936. The Second Edition is being edited by Geoffrey Harcourt and Peter Riach and will contain contributions...

Labor income indices are created for groupings of individuals, using data from the Panel Study of Income Dynamics. People are grouped by a clustering algorithm based on an estimated transition matrix between jobs, by education level, and by skill category. The groups are defined so that...

We prove that a "nondegenerate" m x m coordination game can have at most 2^{M} - 1 Nash equilibria, where M = min(m,n).