Time Variation in the Dynamics of Worker Flows: Evidence from the US and Canada

VAR methods have been used to model the inter-relationships between inflows and outfl ows into unemployment and vacancies using tools such as impulse response analysis. In order to investigate whether such impulse responses change over the course of the business cycle or or over time, this paper uses TVP-VARs for US and Canadian data. For the US, we find interesting differences between the most recent recession and earlier recessions and expansions. In particular, we find the immediate effect of a negative shock on both in ow and out flow hazards to be larger in 2008 than in earlier times. Furthermore, the effect of this shock takes longer to decay. For Canada, we fi nd less evidence of time-variation in impulse responses.

The Dynamics of UK and US Inflation Expectations

This paper investigates the relationship between short term and long term in ation expectations in the US and the UK with a focus on iflation pass through (i.e. how changes in short term expectations affect long term expectations). An econometric methodology is used which allows us to uncover the relationship between in ation pass through and various explanatory variables. We relate our empirical results to theoretical models of anchored, contained and unmoored inflation expectations. For neither country do we find anchored or unmoored inflation expectations. For the US, contained inflation expectations are found. For the UK, our ndings are not consistent with the specifi =c model of contained inflation expectations presented here, but are consistent with a more broad view of expectations being constrained by the existence of an inflation target.

An interregional input-output analysis of the pollution content of trade flows and environmental trade balances between five states in the US Mid-West

In this paper we attempt an empirical application of the multi-region input-output (MRIO) method in order to enumerate the pollution content of interregional trade flows between five Mid-West regions/states in the US –Illinois, Indiana, Iowa, Michigan and Wisconsin – and the rest of the US. This allows us to analyse some very important issues in terms of the nature and significance of interregional environmental spillovers within the US Mid-West and the existence of pollution ‘trade balances’ between states. Our results raise questions in terms of the extent to which authorities at State level can control local emissions where they are limited in the way some emissions can be controlled, particularly with respect to changes in demand elsewhere in the Mid-West and US. This implies a need for policy co-ordination between national and state level authorities in the US to meet emissions reductions targets. The existence of an environmental trade balances between states also raises issues in terms of net losses/gains in terms of pollutants as a result of interregional trade within the US and whether, if certain activities can be carried out using less polluting technology in one region relative to others, it is better for the US as a whole if this type of relationship exists.

Modeling Dependence Structure and Forecasting Market Risk with Dynamic Asymmetric Copula

We investigate the dynamic and asymmetric dependence structure between equity portfolios from the US and UK. We demonstrate the statistical significance of dynamic asymmetric copula models in modelling and forecasting market risk. First, we construct “high-minus-low" equity portfolios sorted on beta, coskewness, and cokurtosis. We find substantial evidence of dynamic and asymmetric dependence between characteristic-sorted portfolios. Second, we consider a dynamic asymmetric copula model by combining the generalized hyperbolic skewed t copula with the generalized autoregressive score (GAS) model to capture both the multivariate non-normality and the dynamic and asymmetric dependence between equity portfolios. We demonstrate its usefulness by evaluating the forecasting performance of Value-at-Risk and Expected Shortfall for the high-minus-low portfolios. From back-testing, e find consistent and robust evidence that our dynamic asymmetric copula model provides the most accurate forecasts, indicating the importance of incorporating the dynamic and asymmetric dependence structure in risk management.

Modelling Housing Prices using a Present Value State Space Model

This paper introduces a State Space approach to explain the dynamics of rent growth, expected returns and Price-Rent ratio in housing markets. According to the present value model, movements in price to rent ratio should be matched by movements in expected returns and expected rent growth. The state space framework assume that both variables follow an autoregressive process of order one. The model is applied to the US and UK housing market, which yields series of the latent variables given the behaviour of the Price-Rent ratio. Resampling techniques and bootstrapped likelihood ratios show that expected returns tend to be highly persistent compared to rent growth. The Öltered expected returns is considered in a simple predictability of excess returns model with high statistical predictability evidenced for the UK. Overall, it is found that the present value model tends to have strong statistical predictability in the UK housing markets.

Modelling Housing Prices using a Present Value State Space Model

This paper introduces a State Space approach to explain the dynamics of rent growth, expected returns and Price-Rent ratio in housing markets. According to the present value model, movements in price to rent ratio should be matched by movements in expected returns and expected rent growth. The state space framework assume that both variables follow an autoregression process of order one. The model is applied to the US and UK housing market, which yields series of the latent variables given the behaviour of the Price-Rent ratio. Resampling techniques and bootstrapped likelihood ratios show that expected returns tend to be highly persistent compared to rent growth. The filtered expected returns is considered in a simple predictability of excess returns model with high statistical predictability evidence for the UK. Overall, it is found that the present value model tends to have strong statistical predictability in the UK housing markets.