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  • Working Papers | Penn Economics
    Epstein and Zin recursive preferences The parameters governing preferences and technology are estimated by means of maximum likelihood using macroeconomic data and asset prices with a particular focus on the term structure of interest rates We estimate a large risk aversion an elasticity of intertemporal substitution higher than one and substantial adjustment costs Furthermore we identify the tensions within the model by estimating it on subsets of these data We conclude by pointing out potential extensions that might improve the model s fit Download Paper 09 018 Dario Caldara Jesus Fernandez Villaverde Juan F Rubio Ramírez Wen Yao Computing DSGE Models with Recursive Preferences This paper compares different solution methods for computing the equilibrium of dynamic stochastic general equilibrium DSGE models with recursive preferences such as those in Epstein and Zin 1989 and 1991 Models with these preferences have recently become popular but we know little about the best ways to implement them numerically To fill this gap we solve the stochastic neoclassical growth model with recursive preferences using four different approaches second and third order perturbation Chebyshev polynomials and value function iteration We document the performance of the methods in terms of computing time implementation complexity and accuracy Our main finding is that a third order perturbation is competitive in terms of accuracy with Chebyshev polynomials and value function iteration while being an order of magnitude faster to run Therefore we conclude that perturbation methods are an attractive approach for computing this class of problems Download Paper 09 017 Pablo Burriel Jesus Fernandez Villaverde Juan F Rubio Ramírez MEDEA A DSGE Model for the Spanish Economy In this paper we provide a brief introduction to a new macroeconometric model of the Spanish economy named MEDEA Modelo de Equilibrio Dinámicode la Economía EspañolA MEDEA is a dynamic stochastic general equilibrium DSGE model that aims to describe the main features of the Spanish economy for policy analysis counterfactual exercises and forecasting MEDEA is built in the tradition of New Keynesian models with real and nominal rigidities but it also incorporates aspects such as a small open economy framework an outside monetary authority such as the ECB and population growth factors that are important in accounting for aggregate fluctuations in Spain The model is estimated with Bayesian techniques and data from the last two decades Beyond describing the properties of the model we perform different exercises to illustrate the potential of MEDEA including historical decompositions long run and short run simulations and counterfactual experiments Download Paper 09 013 Jesus Fernandez Villaverde Pablo Guerrón Quintana Juan F Rubio Ramírez Martín Uribe Risk Matters The Real Effects of Volatility Shocks This paper shows how changes in the volatility of the real interest rate at which small open emerging economies borrow have a quantitatively important effect on real variables like output consumption investment and hours worked To motivate our investigation we document the strong evidence of time varying volatility in the real interest rates faced by a sample of four emerging small open economies Argentina

    Original URL path: http://economics.sas.upenn.edu/pier/working-papers?wp_author_id=145 (2015-07-10)
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  • Working Papers | Penn Economics
    on this concept These models shed light on several aspects of the growth process that could not be properly addressed by alternative theories In this survey we focus on four important aspects namely i the role of competition and market structure ii firm dynamics iii the relationship between growth and development with the notion of appropriate growth institutions and iv the emergence and impact of long term technological waves In each case Schumpeterian growth theory delivers predictions that distinguish it from other growth models and which can be tested using micro data Download Paper 13 025 Philippe Aghion Ufuk Akcigit Jesus Fernandez Villaverde Optimal Capital Versus Labor Taxation with Innovation Led Growth Chamley 1986 and Judd 1985 showed that in a standard neoclassical growth model with capital accumulation and infinitely lived agents either taxing or subsidizing capital cannot be optimal in the steady state In this paper we introduce innovation led growth into the Chamley Judd framework using a Schumpeterian growth model where productivity enhancing innovations result from pro t motivated R D investment Our main result is that for a given required trend of public expenditure a zero tax subsidy on capital becomes suboptimal In particular the higher the

    Original URL path: http://economics.sas.upenn.edu/pier/working-papers?wp_author_id=4411 (2015-07-10)
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  • Working Papers | Penn Economics
    great American inflation from the late 1960s to the early 1980s and of the great moderation of business cycle fluctuations between 1984 and 2007 Our main findings are that while there is strong evidence of changes in monetary policy during Volcker s tenure at the Fed those changes contributed little to the great moderation Instead changes in the volatility of structural shocks account for most of it Also while we find that monetary policy was different under Volcker we do not find much evidence of a big difference in monetary policy among Burns Miller and Greenspan The difference in aggregate outcomes across these periods is attributed to the time varying volatility of shocks The history for inflation is more nuanced as a more vigorous stand against it would have reduced inflation in the 1970s but not completely eliminated it In addition we find that volatile shocks especially those related to aggregate demand were important contributors to the great American inflation Download Paper 10 015 Jesus Fernandez Villaverde Pablo Guerrón Quintana Juan F Rubio Ramírez Fortune or Virtue Time Variant Volatilities Versus Parameter Drifting in U S Data This paper compares the role of stochastic volatility versus changes in monetary policy rules in accounting for the time varying volatility of U S aggregate data Of special interest to us is understanding the sources of the great moderation of business cycle fluctuations that the U S economy experienced between 1984 and 2007 To explore this issue we build a medium scale dynamic stochastic general equilibrium DSGE model with both stochastic volatility and parameter drifting in the Taylor rule and we estimate it non linearly using U S data and Bayesian methods Methodologically we show how to confront such a rich model with the data by exploiting the structure of the high order

    Original URL path: http://economics.sas.upenn.edu/pier/working-papers?wp_author_id=144 (2015-07-10)
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  • Working Papers | Penn Economics
    Keith Kuester Juan F Rubio Ramírez Fiscal Volatility Shocks and Economic Activity We study the effects of changes in uncertainty about future fiscal policy on aggregate economic activity Fiscal deficits and public debt have risen sharply in the wake of the financial crisis While these developments make fisscal consolidation inevitable there is considerable uncertainty about the policy mix and timing of such budgetary adjustment To evaluate the consequences of this

    Original URL path: http://economics.sas.upenn.edu/pier/working-papers?wp_author_id=3640 (2015-07-10)
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  • Working Papers | Penn Economics
    1997 Paper Author Title Search Working Paper Contains Year enter keywords Options Print Email Share 10 014 Eric M Aldrich Jesus Fernandez Villaverde A Ronald Gallant Juan F Rubio Ramírez Tapping the Supercomputer Under Your Desk Solving Dynamic Equilibrium Models This paper shows how to build algorithms that use graphics processing units GPUs installed in most modern computers to solve dynamic equilibrium models in economics In particular we rely on

    Original URL path: http://economics.sas.upenn.edu/pier/working-papers?wp_author_id=148 (2015-07-10)
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  • Working Papers | Penn Economics
    Share 10 011 Jules H van Binsbergen Jesus Fernandez Villaverde Ralph S J Koijen Juan F Rubio Ramírez The Term Structure of Interest Rates in a DSGE Model with Recursive Preferences We solve a dynamic stochastic general equilibrium DSGE model in which the representative household has Epstein and Zin recursive preferences The parameters governing preferences and technology are estimated by means of maximum likelihood using macroeconomic data and asset prices

    Original URL path: http://economics.sas.upenn.edu/pier/working-papers?wp_author_id=157 (2015-07-10)
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  • Working Papers | Penn Economics
    Models with Recursive Preferences This paper compares different solution methods for computing the equilibrium of dynamic stochastic general equilibrium DSGE models with recursive preferences such as those in Epstein and Zin 1989 and 1991 Models with these preferences have recently become popular but we know little about the best ways to implement them numerically To fill this gap we solve the stochastic neoclassical growth model with recursive preferences using four

    Original URL path: http://economics.sas.upenn.edu/pier/working-papers?wp_author_id=232 (2015-07-10)
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  • Working Papers | Penn Economics
    Spanish Economy In this paper we provide a brief introduction to a new macroeconometric model of the Spanish economy named MEDEA Modelo de Equilibrio Dinámicode la Economía EspañolA MEDEA is a dynamic stochastic general equilibrium DSGE model that aims to describe the main features of the Spanish economy for policy analysis counterfactual exercises and forecasting MEDEA is built in the tradition of New Keynesian models with real and nominal rigidities

    Original URL path: http://economics.sas.upenn.edu/pier/working-papers?wp_author_id=235 (2015-07-10)
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