Vasco Gabriel - Academia.edu (original) (raw)

Papers by Vasco Gabriel

Applied Economics, 2003

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In this paper, we propose a simple method for testing cointegration in models that allow for mult... more In this paper, we propose a simple method for testing cointegration in models that allow for multiple shifts in the long run relationship. The procedure consists of computing conventional residual-based tests with standardized residuals from Markov switching estimation. No new critical values are needed. An empirical application to the present value model of stock prices is presented, complemented by a

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Recent research has focused on the links between long memory and structural change, stressing the... more Recent research has focused on the links between long memory and structural change, stressing the long memory properties that may arise in models with parameter changes. In this paper, we contribute to this research by comparing the forecasting abilities of long memory and Markov switching models. Two approaches are employed: a Monte Carlo study and an empirical comparison, using the quarterly Consumer Price inflation rate in Portugal in the period 1968-1998. Although long memory models may capture some in-sample features of the data, when shifts occur in the series considered, their forecast performance is relatively poor, when compared with simple linear and Markov switching models. Moreover, our findings, in a more general framework, are in accordance with the works of Clements and Hendry (1998) and Clements and Krolzig (1998), reinforcing the idea that simple linear time series models remain useful tools for prediction.

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We develop a closed-economy DSGE model of the Indian economy and estimate it by Bayesian Maximum ... more We develop a closed-economy DSGE model of the Indian economy and estimate it by Bayesian Maximum Likelihood methods using Dynare. We build up in stages to a model with a number of features important for emerging economies in general and the Indian economy in particular: a large proportion of credit-constrained consumers, a financial accelerator facing domestic firms seeking to finance their investment, and an informal sector. The simulation properties of the estimated model are examined under a generalized inflation targeting Taylor-type interest rate rule with forward and backward-looking components. We find that, in terms of model posterior probabilities and standard moments criteria, inclusion of the above financial frictions and an infor- mal sector significantly improves the model fit.

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We first develop a two-bloc model of an emerging open economy interacting with the rest of the wo... more We first develop a two-bloc model of an emerging open economy interacting with the rest of the world calibrated using Indian and US data. The model features a financial accelerator and is suitable for examining the effects of financial stress on the real economy. Three variants of the model are highlighted with increasing degrees of financial frictions. The model is used to compare two monetary interest rate regimes: domestic Inflation targeting with a floating exchange rate (FLEX(D)) and a managed exchange rate (MEX). Both rules are characterized as a Taylor-type interest rate rules. MEX involves a nominal exchange rate target in the rule and a constraint on its volatility. We find that the imposition of a low exchange rate volatility is only achieved at a significant welfare loss if the policymaker is restricted to a simple domestic inflation plus exchange rate targeting rule. If on the other hand the policymaker can implement a complex optimal rule then an almost fixed exchange r...

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This paper re-examines empirical inference on stochastic discount factors employing recently deve... more This paper re-examines empirical inference on stochastic discount factors employing recently developed conditional moment procedures (Kitamura, Tripathi and Ahn, Econometrica, 2004; Dominguez and Lobato, Econometrica, 2004, inter alia). Unlike unconditional estimation methods, this approach does not imply potential losses of information and is therefore more efficient. Generalized Empirical Likelihood estimation is particularly suitable for this setting, as it has relatively low bias when estimation requires many moment conditions. The procedures employed in this study also allow us to conduct weak identification-robust inference, which is a pervasive feature in this type of models. Our approach provides an alternative to the kernel-based non-parametric method of Wang (Journal of Finance, 2003).

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We argue that the equation commonly used in the estimation of the wealth effect on consumption mi... more We argue that the equation commonly used in the estimation of the wealth effect on consumption might be unsuitable for that purpose. In particular, if the usual assumptions are employed, the derivation of the equation implies that the wealth effect is indeterminate. Furthermore, it implies that the estimate of the wealth effect should decrease when asset wealth volatility increases. Estimation of a Markov-switching model of the usual long-run aggregate consumption equation provides evidence favourable to the indeterminacy hypothesis

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... Exercises in Lab. • Day 3: Intermediate Topics (Cristano Cantore, Vasco Gabriel, Bo Yang) – U... more ... Exercises in Lab. • Day 3: Intermediate Topics (Cristano Cantore, Vasco Gabriel, Bo Yang) – Use of the External Steady State – Calibration with an External Steady State ... On optimal policy, rules and discretion, Currie and Levine (1993) may also prove useful. ...

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Applied Economics, 2003

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