Pre-announcement and Timing: The Effects of a Government Expenditure Shock
European Economic Review,
An econometric strategy to identify a pre-announced fiscal policy shock is proposed. I show that the reduced form innovations can be recovered by estimating a Vector-moving-average model using the Kalman filter. The structural effects are identified exploiting the shock's pre-announced nature, which leads to potentially different signs of the responses of some endogenous variables during the announcement and after the realization of the shock. I illustrate my strategy by identifying a pre-announced shock to government consumption expenditures. I find that the response of private consumption is significantly negative on impact, rises and becomes significantly positive two quarters after the realization of the policy shock.
Has the Euro Increased International Price Elasticities?
This paper analyzes the role of common data problems when identifying structural breaks in small samples. Most notably, we survey small sample properties of the most commonly applied endogenous break tests developed by Brown, Durbin, and Evans (1975) and Zeileis (2004), Nyblom (1989) and Hansen (1992), and Andrews, Lee, and Ploberger (1996). Power and size properties are derived using Monte Carlo simulations. Results emphasize that mostly the CUSUM type tests are aﬀected by the presence of heteroscedasticity, whereas the individual parameter Nyblom test and AvgLM test are proved to be highly robust. However, each test is signiﬁcantly aﬀected by leptokurtosis. Contrarily to other tests, where skewness is far more problematic than kurtosis, it has no additional eﬀect for any of the endogenous break tests we analyze. Concerning overall robustness the Nyblom test performs best, while being almost on par to more recently developed tests in terms of power.
The Integration of the Central and East European Equity Markets into the International Capital Markets: A Kalman Filter Approach