National Bureau of Economic Research Working PapersThe Latest NBER Working Papers
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Tempered Particle Filtering -- by Edward Herbst, Frank SchorfheideThe accuracy of particle filters for nonlinear state-space models crucially depends on the proposal distribution that mutates time t-1 particle values into time t values. In the widely-used bootstrap particle filter, this distribution is generated by the state-transition equation. While straightforward to implement, the practical performance is often poor. We develop a self-tuning particle filter in which the proposal distribution is constructed adaptively through a sequence of Monte Carlo steps. Intuitively, we start from a measurement error distribution with an inflated variance, and then gradually reduce the variance to its nominal level in a sequence of tempering steps. We show that the filter generates an unbiased and consistent approximation of the likelihood function. Holding the run time fixed, our filter is substantially more accurate in two DSGE model applications than the bootstrap particle filter.
http://papers.nber.org/papers/w23448#fromrss
http://papers.nber.org/papers/w23448#fromrssSpeculative Dynamics of Prices and Volume -- by Anthony A. DeFusco, Charles G. Nathanson, Eric ZwickWe present a dynamic theory of prices and volume in asset bubbles. In our framework, predictable price increases endogenously attract short-term investors more strongly than long-term investors. Short-term investors amplify volume by selling more frequently, and they destabilize prices through positive feedback. Our model predicts a lead-lag relationship between volume and prices, which we confirm in the 2000-2011 US housing bubble. Using data on 50 million home sales from this episode, we document that much of the variation in volume arose from the rise and fall in short-term investment.
http://papers.nber.org/papers/w23449#fromrss
http://papers.nber.org/papers/w23449#fromrssMonetary Policy and the Redistribution Channel -- by Adrien AuclertThis paper evaluates the role of redistribution in the transmission mechanism of monetary policy to consumption. Three channels affect aggregate spending when winners and losers have different marginal propensities to consume: an earnings heterogeneity channel from unequal income gains, a Fisher channel from unexpected inflation, and an interest rate exposure channel from real interest rate changes. Sufficient statistics from Italian and U.S. data suggest that all three channels are likely to amplify the effects of monetary policy. A standard incomplete markets model can deliver the empirical magnitudes if assets have plausibly high durations but a counterfactual degree of inflation indexation.
http://papers.nber.org/papers/w23451#fromrss
http://papers.nber.org/papers/w23451#fromrss