This paper studies the error in forecasting an autoregressive process with a deterministic component. We show that when the data are strongly serially correlated, forecasts based on a model that detrends the data using OLS before estimating the autoregressive parameters are much less precise...

Many continuous time term structure of interest rate models assume a factor structure where the drift and volatility functions are affine functions of the state variable process. These models involve very specific parametric choices of factors and functional specifications of the drift and...

Understanding the dynamics of interest rates and the term structure has important implications for issues as diverse as real economic activity, monetary policy, pricing of interest rate derivative securities and public debt financing. Our paper follows a longstanding tradition of using factor...

This paper extends the Competitive Storage Model by incorporating prominent features of the production process and financial markets. A major limitation of this basic model is that it cannot successfully explain the degree of serial correlation observed in actual data. The proposed extensions...

The non-negativity constraint on inventories imposed on the rational expectations theory of speculative storage implies that the conditional mean and variance of commodity prices are nonlinear in lagged prices and have a kink at a threshold point. In this paper, the structural parameters of this...

This paper considers the implications of omitted mean shifts for estimation and inference in VARs. It is shown that the least squares estimates are inconsistent, and the F test for Granger causality diverges. While model selection rules have the tendency to incorrectly select a lag length that...

In many public policy problems, we need to estimate the way in which policy changes affect people's behavior. In the analysis of tax and subsidy reform, which is the topic of this paper, we need to know how tax-induced price changes affect the amounts that people buy of the taxed goods. We...

This paper examines the implications of intergenerational transfers of time and money for labor supply and capital accumulation. Although intergenerational transfers of time in the form of grandparenting are as substantial as monetary transfers in the data, little is known about the role and...

We present the sampling distributions for the coefficient of skewness, kurtosis, and a joint test of normality for time series observations. In contrast to independent and identically distributed data, the limiting distributions of the statistics are shown to depend on the long run rather than...