The econometrics literature contains many alternative measures of goodness of fit, roughly analogous to R2, for use with equations with dichotomous dependent variables. There is, however, no consensus as to the measures' relative merits or about which ones should be reported in empirical work....

This paper examines the relationship of the term structure of interest rates to monetary policy instruments and to subsequent real activity and inflation in both Europe and the United States. The results show that monetary policy is an important determinant of the term structure spread, but is...

Some recent time-series applications use probit models to measure the forecasting power of a set of variables. Correct inferences about the significance of the variables requires a consistent estimator of the covariance matrix of the estimated model coefficients. A potential source of...

The current review of the 1988 Basel Capital Accord has put the spotlight on the ratios used to assess banks’ capital adequacy. This article examines the effectiveness of three capital ratios—the first based on leverage, the second on gross revenues, and the third on risk-weighted...

Various methods are available to extract the "business cycle component" of a given time series variable. These methods may be derived as solutions to frequency extraction or signal extraction problems and differ in both their handling of trends and noise and their assumptions about the ideal...

This paper introduces a generalized approach to canonical regression, in which a set of jointly dependent variables enters the left-hand side of the equation as a linear combination, formally like the linear combination of regressors in the right-hand side of the equation. Natural applications...

This paper was presented at the conference "Financial services at the crossroads: capital regulation in the twenty-first century" as part of session 6, "The role of capital regulation in bank supervision." The conference, held at the Federal Reserve Bank of New York on February 26-27, 1998, was...

For years, the problems associated with the Lucas critique have loomed over empirical macroeconomics. Since the publication of the classic Lucas (1976) critique, researchers have endeavored to specify models that capture the underlying dynamic decision-making behavior of consumers and firms who...

Since the 1980s, economists have argued that the slope of the yield curve-the spread between long- and short-term interest rates-is a good predictor of future economic activity. While much of the existing research has documented how consistently movements in the curve have signaled past...