In this paper we empirically examine the relationship between the real exchange rate and the real interest rate differential using recent econometric methods robust to potential structural breaks. Generally, our study provides evidence of this relationship in the long-run context. More...

This paper extends the Nelson-Siegel linear factor model by developing a flexible macro-finance framework for modeling and forecasting the term structure of US interest rates. Our approach is robust to parameter uncertainty and structural change, as we consider instabilities in parameters and...

We evaluate stock return predictability using a fully flexible Bayesian framework, which explicitly allows for different degrees of time-variation in coefficients and in forecasting models. We believe that asset return predictability can evolve quickly or slowly, based upon market conditions,...

If asset price risk-return relations vary over time based upon changing economic states, standard unconditional models may "wash out" state dependence and fail to identify that additional risk is contingently compensated with higher return. We address this matter by considering conditional...

Our paper examines conditional risk-return relations in a cross-section of currency portfolios, while modeling economic states using a large number of underlying risk factors. We identify a time-varying relationship between currency returns and volatility risk: investors require a positive risk...

We empirically analyze regional inflation using data from Japan where there is no regulation to impede the free movement of labor, capitals, goods and services across regions. In particular, our analysis will focus on the geographical location of regions and the productivity effect as...

Using the Bayesian factor model, we decompose movements in real effective exchange rates, which can be considered a measure of external competitiveness, into global and country-specific factors. In data from a number of developed and developing countries, we find a particular global trend in...

This paper analyzes empirically interaction between the inflation rates across regions using consumption data on services and the geographical location of regions in Japan. The service sector has been expanding rapidly in terms of its contribution to the total economic activity in advanced...

In order to differentiate between commonality and heterogeneity in real effective exchange rates, which are considered a measure of external competitiveness, we decompose their movements into global and country-specific factors using the Bayesian factor model. First, we show a complex but often...

In this paper, we investigate the dynamics of condominium prices by using recent national and regional data for Japan. First, using left- and right-tailed integration methods to circumvent deficiencies in existing approaches, we propose two definitions of bubbles and show that the condominium...