Methods for applied macroeconomic research by Fabio Canova

By Fabio Canova

The final two decades have witnessed super advances within the mathematical, statistical, and computational instruments to be had to utilized macroeconomists. This swiftly evolving box has redefined how researchers try versions and validate theories. but previously there was no textbook that unites the newest tools and bridges the divide among theoretical and utilized work.

Fabio Canova brings jointly dynamic equilibrium thought, facts research, and complicated econometric and computational how you can give you the first entire set of strategies to be used through educational economists in addition to expert macroeconomists in banking and finance, undefined, and executive. This graduate-level textbook is for readers a professional in sleek macroeconomic idea, econometrics, and computational programming utilizing RATS, MATLAB, or Gauss. necessarily a contemporary therapy of one of these complicated subject calls for a quantitative point of view, a high-quality dynamic conception historical past, and the advance of empirical and numerical methods--which is the place Canova's ebook differs from commonplace graduate textbooks in macroeconomics and econometrics. instead of record a sequence of estimators and their homes, Canova starts off from a category of DSGE types, reveals an approximate linear illustration for the choice ideas, and describes equipment had to estimate their parameters, interpreting their healthy to the information. The booklet is entire with various examples and exercises.

modern monetary analysts desire a powerful starting place in either conception and alertness. tools for utilized Macroeconomic study bargains the basic instruments for the subsequent new release of macroeconomists.

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GDPt = ζt Kt1−η (NtF + N P )η . An d ζt = ln GDPt − (1 − η) ln Kt − η ln(NtF + NtP ), where η is the estimate of ζt is obtained via ln d share of labor income. It is easy to see that ln ζt = ln ζt +ln((NtF )η +(N P )η )−η ln(NtF +N P ), d so that the variance of ln ζt overestimates the variance of ln ζt . This is a general problem: whenever a variable is omitted from an estimated equation, the variance of the estimated residuals is at least as large as the variance of the true one. , if there are differential cost in adjusting full and part-time hours), ln((NtF )η + (N P )η ) − η ln(NtF + N P ) > 0.

6. Methods for Applied Macro Research 2: Models and Approximations 33 . A stochastic Lagrange multiplier approach works even when Bellman equation does not characterize the problem under consideration but requires a somewhat stronger set of assumptions to be applicable. Basically, we need that the objective function is strictly concave, differentiable and that the derivatives have finite expectations; that the constraints are convex, differentiable and that the derivatives have finite expectations; that the choice variables are adapted to the information set; that expected utility is bounded and converges to a limit as T → ∞ and that there exists a sequence of multipliers λt such that at the optimum the Kuhn-Tucker conditions hold with probability 1 (see Sims (2002) for a formal statement of these requirements).

Let h(y) = (h1 (y), . . , hn (y))0 be such that each hj (y) is continuously y¯) ∂h(¯ y) 0 differentiable in the neighborhood of y¯ and let Σh = ∂h( ∂y 0 Σy ( ∂y 0 ) have nonzero diagonal elements, where ∂h(¯ y) ∂y 0 D is a n × m matrix. Then h(yt ) → N(h(¯ y), a2t Σh ) . 22 Suppose yt is iid with mean y¯ and variance σy2 , y¯ 6= 0, 0 < σy2 < ∞. 16 ( T1 t yt )−1 → N (¯ y −1 , T y¯y4 ). 6 Elements of Spectral Analysis A central object in the analysis of time series is the spectral density. 20 (Spectral density): The spectral density of stationary {yt (κ)} process at 1 P∞ frequency ω ∈ [0, 2π] is Sy (ω) = 2π τ =−∞ ACFy (τ ) exp{−iωτ }.

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