MARC Record from Library of Congress

LEADER: 02290cam a22002777a 4500
001 2008610966
003 DLC
005 20080814092154.0
007 cr |||||||||||
008 080723s2008 mau sb 000 0 eng
010 $a 2008610966
040 $aDLC$cDLC
050 00 $aHB1
100 1 $aHamilton, James D.$q(James Douglas),$d1954-
245 10 $aMacroeconomics and ARCH$h[electronic resource] /$cJames D. Hamilton.
260 $aCambridge, MA :$bNational Bureau of Economic Research,$cc2008.
490 1 $aNBER working paper series ;$vworking paper 14151
538 $aSystem requirements: Adobe Acrobat Reader.
538 $aMode of access: World Wide Web.
500 $aTitle from PDF file as viewed on 7/23/2008.
530 $aAlso available in print.
504 $aIncludes bibliographical references.
520 3 $a"Although ARCH-related models have proven quite popular in finance, they are less frequently used in macroeconomic applications. In part this may be because macroeconomists are usually more concerned about characterizing the conditional mean rather than the conditional variance of a time series. This paper argues that even if one's interest is in the conditional mean, correctly modeling the conditional variance can still be quite important, for two reasons. First, OLS standard errors can be quite misleading, with a "spurious regression" possibility in which a true null hypothesis is asymptotically rejected with probability one. Second, the inference about the conditional mean can be inappropriately influenced by outliers and high-variance episodes if one has not incorporated the conditional variance directly into the estimation of the mean, and infinite relative efficiency gains may be possible. The practical relevance of these concerns is illustrated with two empirical examples from the macroeconomics literature, the first looking at market expectations of future changes in Federal Reserve policy, and the second looking at changes over time in the Fed's adherence to a Taylor Rule"--National Bureau of Economic Research web site.
710 2 $aNational Bureau of Economic Research.
830 0 $aWorking paper series (National Bureau of Economic Research : Online) ;$vworking paper no. 14151.
856 40 $uhttp://papers.nber.org/papers/w14151