http://faculty.apec.umn.edu/rsmith/documents/CreateCapitalStock.pdf
http://www.econ.umn.edu/~selis004/su11_3102/GrowthAccountingNotes.pdf
---<quote>---
When calculating real investment, it is best to collect data on nominal investment and then deflate the series by a GDP deflator. This procedure ensures the real investment series, and, thus, the capital stock series, and the real GDP series are deflatedby the same price index.
---<unquote>---
http://acta.mendelu.cz/pdf/actaun201361072367.pdf
http://www.econstor.eu/bitstream/10419/71091/1/73983858X.pdf
---<quote>---
Aware of this problem, HARBERGER (1978) uses three-year averages instead of a single year to generate more stable and reliable capital stock estimates. In a later application of the Steady State Approach, NEHRU and DHARESHWAR (1993) proposed an alternative procedure. In order to generate a reliable initial value of the investment time series they regress the time series of log investments on time and then use the fitted value for the first period to calculate the initial capital stock.
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2014年1月9日木曜日
2013年12月21日土曜日
Study of asset returns in SGM
Naik, V. 1994. "Asset Prices in Dynamic Production Economies with Time-Varying Risk." Review of financial studies, 7(4), 781-801.
Model
(i) time-varying uncertainty of the marginal product of capital (productivity shocks),
(ii) the presence of capital adjustment costs,
(iii) the separation of intertemporal substitution and risk aversion (EZ preferences), and
(iv) the allowance for first-order risk aversion in investors' preferences.
Results
(i) the sensitivity of the price of the aggregate capital stock to shifts in risk is crucially dependent on the level of capital adjustment costs. The effect of shifts in uncertainty is significant only when capital adjustment costs are substantial.
(ii) Intertemporal substitution governs the direction of the effect of changes in risk on the value ofcapital stock. Risk aversion is important in the determination of the magnitude of this effect.
Campanale, C.; R. Castro and G. L. Clementi. 2010. "Asset Pricing in a Production Economy with Chew-Dekel Preferences." Review of Economic Dynamics, 13(2), 379-402.
<quote>
Tallarini (2000) showed that the first of the two issues just outlined can be addressed by disentangling risk aversionfrom the elasticity of intertemporal substitution. By assuming Epstein–Zin preferences, he was able to raise risk aversion at arbitrarily high levels, while keeping the elasticity of substitution anchored at 1. Tallarini went on to show the existence of RRA coefficients such that the market price of risk is consistent with the empirical evidence. However, the price of capital being constant at 1, his model essentially generates no equity premium. This issue was dealt with successfully by Jermann (1998) and Boldrin et al. (2001), who assumed that the allocation of capital cannot adjust immediately or costlessly to productivity shocks. Impediments to the smooth adjustment of capital imply that its price may vary away from 1. However, without limiting households’ willingness to substitute consumption intertemporally, this innovation results mainly in a higher volatility of consumption growth. Both Jermann (1998) and Boldrin et al. (2001) lower the IES by introducing habit formation. The resulting increase in the curvature of the Bernoulli utility function, by increasing risk aversion, also takes care of increasing the volatility of the stochastic discount factor.
<unquote>
SGM; Stochastic Growth Model
Model
(i) time-varying uncertainty of the marginal product of capital (productivity shocks),
(ii) the presence of capital adjustment costs,
(iii) the separation of intertemporal substitution and risk aversion (EZ preferences), and
(iv) the allowance for first-order risk aversion in investors' preferences.
Results
(i) the sensitivity of the price of the aggregate capital stock to shifts in risk is crucially dependent on the level of capital adjustment costs. The effect of shifts in uncertainty is significant only when capital adjustment costs are substantial.
(ii) Intertemporal substitution governs the direction of the effect of changes in risk on the value ofcapital stock. Risk aversion is important in the determination of the magnitude of this effect.
Campanale, C.; R. Castro and G. L. Clementi. 2010. "Asset Pricing in a Production Economy with Chew-Dekel Preferences." Review of Economic Dynamics, 13(2), 379-402.
<quote>
Tallarini (2000) showed that the first of the two issues just outlined can be addressed by disentangling risk aversionfrom the elasticity of intertemporal substitution. By assuming Epstein–Zin preferences, he was able to raise risk aversion at arbitrarily high levels, while keeping the elasticity of substitution anchored at 1. Tallarini went on to show the existence of RRA coefficients such that the market price of risk is consistent with the empirical evidence. However, the price of capital being constant at 1, his model essentially generates no equity premium. This issue was dealt with successfully by Jermann (1998) and Boldrin et al. (2001), who assumed that the allocation of capital cannot adjust immediately or costlessly to productivity shocks. Impediments to the smooth adjustment of capital imply that its price may vary away from 1. However, without limiting households’ willingness to substitute consumption intertemporally, this innovation results mainly in a higher volatility of consumption growth. Both Jermann (1998) and Boldrin et al. (2001) lower the IES by introducing habit formation. The resulting increase in the curvature of the Bernoulli utility function, by increasing risk aversion, also takes care of increasing the volatility of the stochastic discount factor.
<unquote>
SGM; Stochastic Growth Model
2013年12月6日金曜日
2013年12月1日日曜日
Asset price leads business cycles
Backus, David K.; Routledge, Bryan R.; and Zin, Stanley E., "Asset Prices in Business Cycle Analysis" (2007). Tepper School of Business. Paper 414.
http://repository.cmu.edu/cgi/viewcontent.cgi?article=1414&context=tepper
http://repository.cmu.edu/cgi/viewcontent.cgi?article=1414&context=tepper
2013年11月29日金曜日
Unit Roots vs. Trend Stationary
Christiano, L. J. and M. Eichenbaum. 1990. "Unit Roots in Real Gnp: Do We Know, and Do We Care?" Carnegie-Rochester Conference Series on Public Policy
---<quote>---
Macroeconomists have traditionally viewed movements output as representing temporary fluctuations about a deterministic trend. According to this view, innovations to real gross national product (GNP) should have no impact on long-run forecasts of aggregate output. Increasingly, however, this view of aggregate fluctuations has been challenged, Following the provocative work of Nelson and Plosser (1982), numerous economists have argued that real GNP is best characterized as a stochastic process that does not revert to a deterministic trend path. Under these circumstances, innovations to real GNP should affect output forecasts into the indefinite future. In pursuing this interpretation of the data, various researchers have tried to measure the long-run response of real GNP to a shock. Estimates of this response are often referred to as the persistence of shocks to real GNP.
---<unquote>---
---<quote>---
Macroeconomists have traditionally viewed movements output as representing temporary fluctuations about a deterministic trend. According to this view, innovations to real gross national product (GNP) should have no impact on long-run forecasts of aggregate output. Increasingly, however, this view of aggregate fluctuations has been challenged, Following the provocative work of Nelson and Plosser (1982), numerous economists have argued that real GNP is best characterized as a stochastic process that does not revert to a deterministic trend path. Under these circumstances, innovations to real GNP should affect output forecasts into the indefinite future. In pursuing this interpretation of the data, various researchers have tried to measure the long-run response of real GNP to a shock. Estimates of this response are often referred to as the persistence of shocks to real GNP.
---<unquote>---
2013年11月27日水曜日
Trading Costs in IRBC
Backus, D. K.; P. J. Kehoe and F. E. Kydland. 1992. "International Real Business Cycles." Journal of Political Economy
---<quote>---
A surprising feature of these two experiments is that a small trading cost produces most of the properties of autarky. A possible explanation comes from Cole and Obstfeld (1991): if the gains from trade are small, then a small cost may have a large effect on the quantity of trade in goods and assets. To investigate this for our model, we measure the gains from trade by comparing equilibria in the benchmark (free-trade) economy to those in the autarky economy. We express the welfare gain as the percentage increase in the consumption path under autarky necessary to reach the same level of welfare attained with free access to international markets. Welfare in each case is estimated as the mean value of discounted utility over the 50 replications of 100 periods each. We find that consumption in autarky must be increased only 0.3 percent to make consumers as well off as they are when international markets are open. The welfare gains from trade in our theoretical economies stem solely from trade across states and dates. As in similar calculations by Cole and Obstfeld, the gains are remarkably small, which may help to account for the large effect of a small trading cost on the model's equilibria.
---<unquote>---
---<quote>---
A surprising feature of these two experiments is that a small trading cost produces most of the properties of autarky. A possible explanation comes from Cole and Obstfeld (1991): if the gains from trade are small, then a small cost may have a large effect on the quantity of trade in goods and assets. To investigate this for our model, we measure the gains from trade by comparing equilibria in the benchmark (free-trade) economy to those in the autarky economy. We express the welfare gain as the percentage increase in the consumption path under autarky necessary to reach the same level of welfare attained with free access to international markets. Welfare in each case is estimated as the mean value of discounted utility over the 50 replications of 100 periods each. We find that consumption in autarky must be increased only 0.3 percent to make consumers as well off as they are when international markets are open. The welfare gains from trade in our theoretical economies stem solely from trade across states and dates. As in similar calculations by Cole and Obstfeld, the gains are remarkably small, which may help to account for the large effect of a small trading cost on the model's equilibria.
---<unquote>---
2013年11月26日火曜日
Complete vs. Incomplete Market (1)
Baxter, M. and M. J. Crucini. 1995. "Business Cycles and the Asset Structure of Foreign-Trade." International Economic Review
---<quote>----
The within-country correlation between saving and investment is slightly lower in the bond economy compared with the complete markets economy. This might seem surprising, since one's intuition is that closing asset markets, thus forcing individualsto bear more country-specificrisk, would act to increase within-country saving-investment correlations. However, this "basic saving measure" (defined as output minus consumption) need not be a good measure of true saving in an open economy, as discussed by Obstfeld (1986) and Stockman and Svensson (1987).
---<unquote>----
---<quote>----
The within-country correlation between saving and investment is slightly lower in the bond economy compared with the complete markets economy. This might seem surprising, since one's intuition is that closing asset markets, thus forcing individualsto bear more country-specificrisk, would act to increase within-country saving-investment correlations. However, this "basic saving measure" (defined as output minus consumption) need not be a good measure of true saving in an open economy, as discussed by Obstfeld (1986) and Stockman and Svensson (1987).
---<unquote>----
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