#2008-036C "Where’s the Smoking Gun? A Study of Underwriting Standards for US Subprime Mortgages"
by Geetesh Bhardwaj, and Rajdeep Sengupta
October 2008
Revised October 2009

The dominant explanation for the meltdown in the U.S. subprime mortgage market is that lending standards dramatically weakened after 2004. Using loan-level data, we examine underwriting standards on securitized subprime mortgage originations from 1998 to 2007. More...

#2008-035A "Macroeconometric Equivalence, Microeconomic Dissonance, and the Design of Monetary Policy"
by Andrew T. Levin, J. David López-Salido, Edward Nelson, and Tack Yun
October 2008

Many recent studies in macroeconomics have focused on the estimation of DSGE models using a system of loglinear approximations to the models’ nonlinear equilibrium conditions. More...

PUBLISHED: Journal of Monetary Economics, October 2008, 55(S1), pp. S48-62

#2008-034C "The Interplay between Preemptive and Defensive Counterterrorism Measures: A Two-Stage Game"
by Subhayu Bandyopadhyay, and Todd Sandler
October 2008
Revised April 2009

A two-stage game depiction of counterterrorism is presented, where the emphasis is on the interaction between the preemptive and defensive measures taken by two targeted countries facing a common threat. More...

FORTHCOMING: Economica

#2008-033A "Are Credit Unions Too Small?"
by David C. Wheelock, and Paul Wilson
September 2008

Since 1985, the share of U.S. depository institution assets held by credit unions has nearly doubled, and the average (inflation-adjusted) size of credit unions has increased over 600 percent. We use a non-parametric local-linear estimator to estimate a cost relationship for credit unions and derive estimates of ray-scale and expansion-path scale economies. More...

#2008-032A "The Great Inflation: Did The Shadow Know Better?"
by William Poole, Robert H. Rasche, and David C. Wheelock
September 2008

The Shadow Open Market Committee was formed in 1973 in response to rising inflation and the apparent unwillingness of U.S. policymakers to implement policies necessary to maintain price stability. More...

#2008-031B "Asset Prices, Exchange Rates and the Current Account"
by Marcel Fratzscher, Luciana Juvenal, and Lucio Sarno
August 2008
Revised May 2009

This paper analyses the role of asset prices in comparison to other factors, in particular exchange rates, as a driver of the US trade balance. More...

#2008-030B "Averaging Forecasts from VARs with Uncertain Instabilities"
by Todd E. Clark, and Michael W. McCracken
August 2008
Revised October 2009

Recent work suggests VAR models of output, inflation, and interest rates may be prone to instabilities. In the face of such instabilities, a variety of estimation or forecasting methods might be used to improve the accuracy of forecasts from a VAR. More...

FORTHCOMING: Journal of Applied Econometrics

#2008-029A "Tests of Equal Predictive Ability with Real-Time Data"
by Todd E. Clark, and Michael W. McCracken
August 2008

This paper examines the asymptotic and finite-sample properties of tests of equal forecast accuracy applied to direct, multi–step predictions from both non-nested and nested linear regression models. More...

PUBLISHED: Journal of Business and Economic Statistics, January 2009, 27(4), pp. 441-54

#2008-028A "Improving Forecast Accuracy by Combining Recursive and Rolling Forecasts"
by Todd E. Clark, and Michael W. McCracken
August 2008

This paper presents analytical, Monte Carlo, and empirical evidence on combining recursive and rolling forecasts when linear predictive models are subject to structural change. More...

FORTHCOMING: International Economic Review

#2008-027A "Threshold Adjustment in Deviations from the Law of One Price"
by Luciana Juvenal, and Mark P. Taylor
August 2008

Using self-exciting threshold autoregressive models, we explore the validity of the law of one price (LOOP) for sixteen sectors in nine European countries. More...

PUBLISHED: Studies in Nonlinear Dynamics and Econometrics, September 2008, 12(3)