This paper applies the Model Confidence Set (MCS) procedure of Hansen, Lunde, and Nason (2003) to a set of volatility models. A MCS is analogous to confidence interval of a parameter in the sense that the former contains the best forecasting model with a certain probability. The key to the MCS is that it acknowledges the limitations of the information in the data. The empirical exercise is base...

In this paper we discuss the properties of confidence intervals for regression parameters based on robust standard errors. We discuss the motivation for a modification suggested by Bell and McCaffrey (2002) to improve the finite sample properties of the confidence intervals based on the conventional robust standard errors. We show that the Bell-McCaffrey modification is a natural extension of a...

I apply the Johansen and Swensen (1999, 2004) method of testing exact rational expectations within the cointegrated VAR (Vector Auto-Regressive) model, to testing the New Keynesian (NK) model. This method permits the testing of rational expectation systems, while allowing for non-stationary data. The NK-model is tested on quarterly U.S. and Euro area time series data. I find that the restrictio...

The use of propensity score methods for program evaluation with non-experimental data typically requires the propensity score be estimated, often with a model whose specification is unknown. While theoretical results suggest that estimators utilizing more flexible propensity score specifications perform better, this has not filtered into applied research. Here, we provide Monte Carlo evidence i...

An electronic limit order book is resilient when it reverts to its normal shape promptly after large trades. This paper suggests a continuous-time impulse response function based on intensities, which formalizes resiliency in terms of a timeframe and probability of order book replenishment. This is then estimated for trading on an LSE order book, using an appropriate parametric model which view...

The central bank’s monetary policy targets are usually assumed to be constant overtime for simplicity when estimating a Taylor rule, but recent studies have shed some light on the time variation in policy targets, especially in the inflation target. The potential bias due to misspecification of the time variation can be quite considerable, especially in regime-swtiching models. In this paper, w...

This paper estimates ordered logit and probit regression models for bank ratings which also include a country index to capture country-specific variation. The empirical findings provide support to the hypothesis that the individual international bank ratings assigned by Fitch Ratings are underpinned by fundamental quantitative financial analyses. Also, there is strong evidence of a country effe...

This paper estimates a simple structural model of monetary policy in the UK for 1963-2000, focusing on the policy of inflation targeting introduced in 1992. Our main findings are: i) the adoption of inflation targets led to significant changes in monetary policy giving greater weight to inflation; (ii) monetary policy post-1992 is asymmetric as policy makers respond more to upward deviation of ...

Many empirical questions in economics and other social sciences depend on causal effects of programs or policies. In the last two decades much research has been done on the econometric and statistical analysis of the effects of such programs or treatments. This recent theoretical literature has built on, and combined features of, earlier work in both the statistics and econometrics literatures....

This paper uses the adaptive Lasso estimator to determine variables important for economic growth. The adaptive Lasso estimator is a computationally very efficient procedure that simultaneously performs model selection and parameter estimation. The computational cost of this method is negligibly small compared with standard approaches in the growth regressions literature. We apply this method f...