6 Works

Markov‐Switching Three‐Pass Regression Filter

Pierre Guérin, Danilo Leiva-Leon & Massimiliano Marcellino
We introduce a new approach for the estimation of high-dimensional factor models with regime-switching factor loadings by extending the linear three-pass regression filter to settings where parameters can vary according to Markov processes. The new method, denoted as Markov-switching three-pass regression filter (MS-3PRF), is suitable for datasets with large cross-sectional dimensions, since estimation and inference are straightforward, as opposed to existing regime-switching factor models where computational complexity limits applicability to few variables. In a Monte...

Forecasting the Price of Oil

Ron Alquist, Lutz Kilian & Robert J. Vigfusson
We address some of the key questions that arise in forecasting the price of crude oil. What do applied forecasters need to know about the choice of sample period and about the tradeoffs between alternative oil price series and model specifications? Are real or nominal oil prices predictable based on macroeconomic aggregates? Does this predictability translate into gains in out-of-sample forecast accuracy compared with conventional no-change forecasts? How useful are oil futures markets in forecasting...

Are Working Hours Complements in Production?

Lin Shao, Faisal Sohail & Emircan Yurdagul
This paper uses Canadian matched employer-employee data to show that working hours are gross complements in production rather than perfect substitutes, as is typically assumed. We exploit within-establishment and individual-level variation in hours and wages to document novel evidence consistent with complementarities in hours worked. Next, we estimate an elasticity of substitution in working hours of 0.69 in the aggregate and between 0.52 and 1.04 at the industry level. We validate our estimates by showing...

Fiscal Policy in the Age of COVID-19: Does It “Get in All of the Cracks”?

Pierre-Olivier Gourinchas, Şebnem Kalemli-Özcan, Veronika Penciakova & Nicholas Sander
The COVID-19 pandemic caused an uncommon recession that required uniquely large and often novel fiscal responses. Government-imposed lockdowns created severe supply bottlenecks in some sectors of the economy, and physical distancing led to dramatic changes in patterns of consumer spending. Some sectors of the economy—such as online retail—benefited, while many others—such as restaurants and travel—struggled to deal with losses of customers and the constraints of lockdowns and remote work. In reaction to this, many governments...

Is the Discretionary Income Effect of Oil Price Shocks a Hoax?

Christiane Baumeister, Lutz Kilian & Xiaoqing Zhou
The transmission of oil price shocks has been a question of central interest in macroeconomics since the 1970s. There has been renewed interest in this question after the large and persistent fall in the real price of oil in 2014–16. In the context of this debate, Ramey (2017) makes the striking claim that the existing literature on the transmission of oil price shocks is fundamentally confused about the question of how to quantify the effect...

Understanding Post-COVID Inflation Dynamics

Martín Harding, Jesper Lindé & Mathias Trabandt
We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. The nonlinear Phillips curve in our model arises due to a quasi-kinked demand schedule for goods produced by firms. Our model can jointly account for the modest decline in inflation during the Great Recession and the surge in inflation post-COVID-19. Because our model implies a stronger transmission of...

Registration Year

  • 2022
  • 2021

Resource Types

  • Text


  • Centre for Economic Policy Research
  • Bank of Canada
  • University of Michigan–Ann Arbor
  • University of Notre Dame
  • Federal Reserve Board of Governors
  • University of California, Berkeley
  • University of Melbourne
  • Halle Institute for Economic Research
  • Carlos III University of Madrid
  • University of Maryland, College Park