This paper studies the predictive performance and in-sample dynamics of three regime switching models for Swedish macroeconomic time series. The models discussed are threshold autoregressive (TAR), Markov switching autoregressive (MSM-AR), and smooth-transition autoregressive (STAR) regime switching models. We perform recursive out-of-sample forecasting to study the predictive performance of the models. We also assess the in-sample dynamics correspondence to the forecast performance and find that there is not always a relationship. Furthermore, we seek to explore if these unrestricted models yield interpretable results regarding the regimes from an macroeconomic standpoint. We assess GDP-growth, the unemployment rate, and government bond yields and find evidence of Teräsvirta's claims that even when the data has non-linear dynamics, non-linear models might not improve the forecast performance of linear models when the forecast window is linear.

In this note we develop a Taylor rule based empirical exchange rate model for eleven major currencies that endogenously determines the number of structural breaks in the coefficients. Using a constant parameter specification and a standard time-varying parametermodel as competitors reveals that our flexible modeling framework yields more precise density forecasts for all major currencies under scrutiny over the last 24 years. / Series: Department of Economics Working Paper Series

We analyze the interaction between monetary policy in the US and the global economy proposing a new class of Bayesian global vector autoregressive models that accounts for time-varying parameters and stochastic volatility (TVP-SV-GVAR). Our results suggest that US monetary policy responds to shocks to the global economy, in particular to global aggregate demand and monetary policy shocks. On the other hand, US-based contractionary monetary policy shocks lead to persistent international output contractions and a drop in global inflation rates, coupled with rising interest rates in advanced economies and a real depreciation of currencies with respect to the US dollar. We find considerable evidence for heterogeneity in the spillovers across countries, as well for changes in the transmission of monetary policy shocks over time. (authors' abstract) / Series: Department of Economics Working Paper Series

Existing estimations of implicit inflation target are primarily based on the assumption of parameter stability over time horizon. This work relaxes this assumption and proposes alternative framework based on time-varying parameter model. We aim on behaviour of European Central Bank in order to compare its official proclamations of price stability levels with our implicit estimations. We will also examine how two pillar strategy of European Central Bank is practically used.

In this study, we aim to develop new likelihood based method for estimating parameters of ordinary differential equations (ODEs) / delay differential equations (DDEs) models. Those models are important for modeling dynamical processes that are described in terms of their derivatives and are widely used in many fields of modern science, such as physics, chemistry, biology and social sciences. We use our new approach to study a distributed delay differential equation model, the statistical inference of which has been unexplored, to our knowledge. Estimating a distributed DDE model or ODE model with time varying coefficients results in a large number of parameters. We also apply regularization for efficient estimation of such models. We assess the performance of our new approaches using simulation and applied them to analyzing data from epidemiology and ecology.

Economic systems are often subject to structural variability. For the achievement of correct structural specification in econometric modelling it is then important to allow for parameters that are time-varying, and to apply estimation techniques suitably designed for inference in such models. One realistic model assumption for such parameter variability is the Markovian model, and Kaiman filtering is then assumed to be a convenient estimator. In the thesis several aspects of using Kaiman filtering approaches to estimation in that framework are considered. The application of the Kaiman filter to estimation in econometric models is straightforward if a set of basic assumptions are satisfied, and if necessary initial specifications can be accurately made. Typically, however, these requirements can generally not be perfectly met. It is therefore of great importance to know the consequences of deviations from the basic assumptions and correct initial specifications for inference, in particular for the small sample situations typical in econometrics. If the consequences are severe it is essential to develop techniques to cope with such aspects.For estimation in interdependent systems a two stage Kaiman filter is proposed and evaluated, theoretically, as well as by a small sample Monte Carlo study, and empirically. The estimator is approximative, but with promising small sample properties. Only if the transition matrix of the parameter model and an initial parameter vector are misspecified, the performance deteriorates. Furthermore, the approach provides useful information about structural properties, and forms a basis for good short term forecasting.In a reduced form fraaework most of the basic assumptions of the traditional Kaiman filter are relaxed, and the implications are studied. The case of stochastic regressors is, under reasonable additional assumptions, shown to result in an estimator structurally similar to that due to the basic assumptions. The robustness properties are such that in particular the transition matrix and the initial parameter vector should be carefully estimated. An estimator for the joint estimation of the transition matrix, the parameter vector and the model residual variance is suggested and utilized to study the consequences of a misspecified parameter model. By estimating th transitions the parameter estimates are seen to be robust in this respect. / <p>Härtill 4 delar</p> / digitalisering@umu

<p>This dissertation is a collection of essays with the main objective of estimate and understand macroeconomic behavior of emerging countries by the lenses of modern tools in general equilibrium modeling.</p><p>In the first chapter, I study whether structural parameters of Small Open Economy Real Business Cycle models are constant when applied to Emerging Markets data. Using data from Argentina, I estimate a small open economy model with trend shocks and working capital constraints, augmented with time varying parameters. I find that so called ``structural" parameters suffer substantial changes in the period 1983-2008. Structural instabilities arise from both technological and financial sources. Given these findings, I inquire which are the features of the data that parameter drifts capture. I review emerging markets facts and find parameter instabilities play a key role in addressing for the variability observed in the data.</p><p>In the second chapter, I study policy changes in emerging countries. Motivated by the repeated stabilization programs implemented by emerging economies during the last 30 years, I develop a dynamic stochastic general equilibrium model with Markov-Switching to study fiscal and monetary policies in emerging economies. I estimate the model for Mexico and find strong evidence of policy changes. Two Regimes are identified. The Active Monetary Policy Regime (AMP), in which monetary and fiscal policies respond to inflation and government debt, respectively; and the Active Fiscal Policy Regime (AFP), in which fiscal policy does not respond to government debt and monetary policy does not respond to inflation. AMP holds during short periods of time after macroeconomic crises during the 80s and 90s, and for a long period after 2002. The rest of the periods, AFP is in effect. I find that switches from AFP to AMP have strong stabilization effects at the cost of high output losses. Moreover, credibility in the persistence of the regime change is key to assess the effectiveness of the stabilization program.</p> / Dissertation

xi, 87 p. : ill. A print copy of this thesis is available through the UO Libraries. Search the library catalog for the location and call number. / The behavior of the macroeconomy and monetary policy is heavily influenced by expectations. Recent research has explored how minor changes in expectation formation can change the stability properties of a model. One common way to alter expectation formation involves agents' use of econometrics to form forecasting equations. Agents update their forecasts based on new information that arises as the economy progresses through time. In this way agents "learn" about the economy. Previous learning literature mostly focuses on agents using a fixed data size or increasing the amount of data they use. My research explores how agents might endogenously change the amount of data they use to update their forecast equations. My first chapter explores how an established endogenous learning algorithm, proposed by Marcet and Nicolini, may influence monetary policy decisions. Under rational expectations (RE) determinacy serves as the main criterion for favoring a model or monetary policy rule. A determinant model need not result in stability under an alternative expectation formation process called learning. Researchers appeal to stability under learning as a criterion for monetary policy rule selection. This chapter provides a cautionary tale for policy makers and reinforces the importance of the role of expectations. Simulations appear stable for a prolonged interval of time but may suddenly deviate from the RE solution. This exotic behavior exhibits significantly higher volatility relative to RE yet over long simulations remains true to the RE equilibrium. In the second chapter I address the effectiveness of endogenous gain learning algorithms in the presence of occasional structural breaks. Marcet and Nicolini's algorithm relies on agents reacting to forecast errors. I propose an alternative, which relies on agents using statistical information. The third chapter uses standard macroeconomic data to find out whether a model that has non-rational expectations can outperform RE. I answer this question affirmatively and explore what learning means to the economy. In addition, I conduct a Monte Carlo exercise to investigate whether a simple learning model does, empirically, imbed an RE model. While theoretically a very small constant gain implies RE, empirically learning creates bias in coefficient estimates. / Committee in charge: George Evans, Co-Chairperson, Economics; Jeremy Piger, Co-Chairperson, Economics; Shankha Chakraborty, Member, Economics; Sergio Koreisha, Outside Member, Decision Sciences

The U.S. forest products industry has witnessed an unprecedented period of mergers and acquisitions in the last decades. The overall goal of this thesis is to examine the impact of these activities on the financial performance and market power of the U.S. forest products industry in the last several decades. The first part of this thesis evaluated the mergers by event study. The results revealed that the equity market reacted positively to these mergers; the position of a firm and the relative transaction size explained most of the variations of the cumulative abnormal returns; and the risk for most of the selected 14 acquiring firms had changed after the mergers. The second part examined the market power of the U.S. paper industry by the new empirical industrial organization approach. The results indicated that the oligopoly power remained significant at the 1% level over the whole sample period; whereas the oligopsony power had dropped dramatically and become insignificant at the 5% level in recent 30 years.

This dissertation consists of three studies on the anticipation of mergers and acquisitions (M&amp;As) and its impact on takeover event studies.  Article I investigates whether the market can anticipate both takeovers and their payment forms prior to their announcement dates. This article also proposes a new time-series approach for detecting the ex-ante deal-anticipation and payment-form anticipation dates. The results indicate that the majority of deals and their payment forms are anticipated much earlier than has been documented in previous takeover studies. Moreover, controlling for the anticipation dates matters for explaining the choice of payment method in M&amp;As. Article II studies how assuming that M&amp;As are unpredictable during the estimation window affects the measurement of abnormal returns. The results show that a part of takeover synergy is indeed incorporated into the stock prices during the estimation window of previous studies, around the deal-anticipation dates. This article estimates the parameters of the expected return model from the pre-anticipation period to control the consequences of ex-ante anticipation on the estimates of abnormal returns. Using the anticipation-adjusted approach significantly improves the estimation of the event-window abnormal returns, and provides new insights into some well-documented takeover results. Article III examines how the abnormal returns are affected when a standard event study assumes that the parameters of the expected return model are stable. Using a sample of firm takeovers, the results indicate that the parameters are indeed unstable. This article introduces a time-varying market model to account for the dynamics of merging likelihood when it estimates the abnormal returns. The findings show that the stability assumption causes a standard event study to overestimate significantly the abnormal returns to the target and acquirer shareholders. / <p>At the time of the doctoral defense, the following papers were unpublished and had a status as follows: Paper 1: Manuscript. Paper 2: Manuscript. Paper 3: Manuscript.</p>