Building on Beaudry, Nam and Wang (2011) - hereafter BNW -, we use survey data on consumer sentiment in order to identify the causal effects of confidence shocks on real economic activity in a selection of advanced economies. Starting from a set of closed-economy VAR models, we show that these...

Reflecting the nature of economic decisions, the error correction mechanism (ECM) in the error-correction representation of a system of co-integrated variables may arise from forward-looking behavior. In such a case, the estimated ECM coefficients may misleadingly appear to be insignificant or...

In this paper, we revisit the issue of excess sensitivity of consumption to income and address the weak instrument problem that is well documented in this literature. Using quarterly data for the U.S. economy, we first highlight the weak instrument problem by showing that the use of conventional...

This paper develops a dynamic model of rational behavior under uncertainty, in which the agent maximizes the stream of future τ-quantile utilities, for τ ∈ (0, 1). That is, the agent has a quantile utility preference instead of the standard expected utility. Quantile preferences have useful...

In this paper we use the covariate quantile autoregression approach to test whether consumption is a constant unit root process, as predicted by the permanent income hypothesis (PIH). We find evidence that at low quantiles of the conditional quantile function of consumption the persistence of...

This paper derives a structural import demand equation and estimates it for a large number of countries, using recent time series techniques that address the problem of nonstationarity. Because the statistical properties of the different estimators have been derived only asymptotically,...

The paper estimates export demand elasticities for a large number of developing and developed countries, using time-series techniques that account for the nonstationarity in the data. The average long-run price and income elasticities are found to be approximately -1 and 1.5, respectively. Thus,...

Testing for the money illusion hypothesis in aggregate consumption function generally involves a regression model that projects real consumption onto nominal disposable income and a consumer price index. Price data are usually available at a monthly level, but consumption and income data are...

Many macroeconomic variables exhibit Markov regime-switching characteristic, and the latent state variable controlling regime change is endogenous. This paper shows that if the regressor is endogenously switching, the OLS estimator of the regression coefficients will be biased. A simple two-step...

Short-term analysis is generally performed with seasonally adjusted data from which further estimation of the business cycle is performed through well-known filters (HP, Baxter-King). However, the whole procedure is not fully consistent, because seasonal adjustment and trend-cycle estimation do...