Federal Reserve Board,
C Ave & 20th Street NW
Washington, DC 20551
Institutional Affiliation: Federal Reserve Board
Information about this author at RePEc
NBER Working Papers and Publications
|March 2017||Shock Restricted Structural Vector-Autoregressions|
with Sydney C. Ludvigson, Serena Ng: w23225
Identifying assumptions need to be imposed on dynamic models before they can be used to analyze the dynamic effects of economically interesting shocks. Often, the assumptions are only rich enough to identify a set of solutions. This paper considers two types of restrictions on the structural shocks that can help reduce the number of plausible solutions. The first is imposed on the sign and magnitude of the shocks during unusual episodes in history. The second restricts the correlation between the shocks and components of variables external to the model. These non-linear inequality constraints can be used in conjunction with zero and sign restrictions that are already widely used in the literature. The effectiveness of our constraints are illustrated using two applications of the oil market...
|December 2015||Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response?|
with Sydney C. Ludvigson, Serena Ng: w21803
Uncertainty about the future rises in recessions. But is uncertainty a source of business cycles or an endogenous response to them, and does the type of uncertainty matter? We propose a novel SVAR identification strategy to address these questions via inequality constraints on the structural shocks. We find that sharply higher macroeconomic uncertainty in recessions is often an endogenous response to output shocks, while uncertainty about financial markets is a likely source of output fluctuations. But the findings also suggest that macroeconomic uncertainty plays an important role in recessions, by substantially amplifying downturns caused by other shocks.
|December 2014||Capital Share Risk in U.S. Asset Pricing|
with Martin Lettau, Sydney C. Ludvigson: w20744
A single macroeconomic factor based on growth in the capital share of aggregate income exhibits significant explanatory power for expected returns across a range of equity characteristic portfolios and non-equity asset classes, with risk price estimates that are of the same sign and similar in magnitude. Positive exposure to capital share risk earns a positive risk premium, commensurate with recent asset pricing models in which redistributive shocks shift the share of income between the wealthy, who finance consumption primarily out of asset ownership, and workers, who finance consumption primarily out of wages and salaries.
Published: MARTIN LETTAU & SYDNEY C. LUDVIGSON & SAI MA, 2019. "Capital Share Risk in U.S. Asset Pricing," The Journal of Finance, vol 74(4), pages 1753-1792.