Bill Dupor. Economist.
Contact. Ohio State
University. Arps Hall. 1945 N. High St. Columbus OH 43210.
dupor@econ.ohio-state.edu
Economics 201:
Economics 806: Answer Keys
Research:
Six Recent Working, Forthcoming & Published
Papers
Executing Long Run Restrictions. With Leonard Kiefer. Long
run identification typically assumes a variable's cumulative response to a
particular shock is zero. Successful implementation of this approach
requires that a researcher accurately represents the time series' covariance
properties at both short and long leads and lags. In practice, researchers
restrict this representation to a short-order vector-autoregression. If
the short-order VAR permits insufficiently rich dynamics, inferences will likely
be incorrect. We show how the short-order VAR problem is ameliorated on
some dimensions by estimating a moving average representation directly.
The moving average is estimated non-parametrically by Local Projections,
introduced in Jorda (2005). Data from a stochastic growth model are used to
evaluate our approach. Relative to the VAR method, the moving average
approach reduces the bias in population by 68% and the bias in small sample by
50%. The root mean square error increases by 9%. Download.
What Do Technology Shocks Tell
Us about the New Keynesian Paradigm? With Jing Han and Yi Chan Tsai.
Researchers have used
unanticipated changes to monetary policy to identify preference and technology
parameters of macroeconomic models. This paper uses changes in technology to
identify the same set of parameters. Estimates based on technology shocks differ
substantially from those based on monetary policy shocks. In the post World War
II United States, a positive technology shock reduces inflation and increases
hours worked, significantly and rapidly in both cases. Relative to policy shock
identification, technology shock identification implies: (1) long duration
durability in preferences instead of short duration habit, (2) built-in
inflation inertia disappears and price flexibility increases. In response to
technological improvement, consumption durability increases hours worked because
households temporarily increase labor supply to accumulate durables towards new,
higher steady state levels. Limited nominal rigidities allow inflation to fall
because firms are able to immediately cut prices when households' labor supply
increases.
Download
Integrating Sticky
Information and Sticky Prices. With Tomiyuki Kitamura and Takayuki
Tsuruga. Understanding the relationship between nominal and real
variables, most notably inflation and cyclical output, is one of economics’
fundamental questions. Towards this understanding, we develop a model that
integrates sticky information and sticky prices, i.e. dual stickiness. We find
that both rigidities are present in U.S. data. We also show that the dual
stickiness model’s closest competitor is the hybrid New Keynesian model. For
both models, current inflation depends in part on last period’s inflation. The former model achieves this dependence endogenously through the interaction
of the two rigidities, rather than through backward-looking behavior. U.S. data
supports the dual stickiness over the hybrid model because lagged expectations
terms appear in the former’s inflation Euler equation. Finally, we show that it
is important quantitatively to distinguish between the two by simulating a
dynamic equilibrium model under each of the two inflation equations.
(Formerly circulated as 'Do Sticky Prices Need to Be Replaced by Sticky
Information?') Download
Does The Federal Reserve Do What It Says It Expects to Do? With Tim Conley and Tokhir Mirzoev. This paper studies the behavior of the Federal Open Market Committee in setting the Federal Funds Target Rate and making a bias announcement. The bias announcement states the likely direction of policy at the next meeting. The current bias concerning the next interest rate decision should be the optimal forecast based on the committee's interest rate policy rule. Given the interest rate rule, the central bank can forecast the target rate desired at the following meeting. The difference between the expected next meeting rate and the current rate should determine the current bias announcement. The predicted interest rate from the estimated policy should be consistent not only with the observed interest rate, but also with the observed bias announcement. We jointly estimate interest rate and bias announcement decision rules. We reject the hypothesis that the bias announcement rule is made in a manner consistent with the interest rate rule. Download
Stabilizing Non-Fundamental Asset Price Movements under Discretion and Limited Information. (Journal of Monetary Economics). Inflation, output and interest rate stabilization are all potential central bank objectives. We explore whether monetary policy should respond to asset price fluctuations, when they are driven by irrational expectational shocks to the future returns to capital. In our model, an optimistic shock to future returns generates both an increase in equity prices and physical investment. The increased investment is inefficient and, thus, a central bank optimally responds to this expectations shocks. This induces a trade-off between stabilizing nominal prices and non-fundamental asset price movements. We compare the optimal policy under different assumptions: full versus limited information and commitment versus discretion. If the central bank has limited information about whether an asset price movement has a fundamental or non-fundamental origin, then the central bank responds less aggressively to the non-fundamental exuberance shocks than under full information. Without commitment, a central bank responds more aggressively to non-fundamental exuberance shocks. Download
Sticky Information:
The Impact of Different Information Updating Schemes. With Takayuki Tsuruga. (Journal of
Money, Credit and Banking). Download
Two Page Resume.
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