Research

Work in progress:
  • A note on testing for inflation of zero observations.
  • A model for policy interest rates (with Gernot Müller and Armin Seibert).
  • Fitting zero-inflated ordered choice models using STATA (with David Dale).
  • The individual preferences of the FOMC members and predictability of the Fed funds rate.


Modeling zero inflation in count data time series with bounded support 

(with Tobias A. Möller, Christian H. Weiß and Hee-Young Kim) -- forthcoming in Methodology & Computing in Applied Probability

ABSTRACT: Real count data time series often show an excessive number of zeros, which can form quite different patterns. We develop four extensions of the binomial autoregressive model for autocorrelated counts with a bounded support, which can accommodate a broad variety of zero patterns. The stochastic properties of these models are derived, and ways of parameter estimation and model identification are discussed. The usefulness of the models is illustrated, among others, by an application to the monetary policy decisions of the National Bank of Poland.

KEYWORDS: binomial distribution · count data time series · Hidden Markov model · Markov model · zero inflation




Modeling status quo decisions: A cross-nested ordered probit model -- R&R.

Previous versions:

ABSTRACT: The decisions to reduce, leave unchanged, or increase a choice variable (such as prices or policy interest rates) are often characterized by abundant status quo outcomes that can be generated by different decision-making paths. The decreases and increases may also be driven by distinct processes. To adequately address these issues this paper develops a flexible mixture model with endogenously switching regimes. Three latent regimes, which are interpreted in the interest rate setting context as loose, neutral and tight policy stances, create separate processes for increases and decreases and overlap at a status quo outcome, generating three different types of zeros. The model allows for endogenous explanatory variables and correlation among the decisions on the regime and on the sizes of hikes or cuts. These implicit decisions are modeled by three ordered probit equations estimated simultaneously. In the empirical application to monetary policy, the new model is not only highly favored by statistical tests but also produces economically more meaningful inference with respect to the standard and two-part zero-inflated models for ordinal responses, which deliver inconsistent estimates as demonstrated by Monte Carlo experiments.
KEYWORDS: ordinal responses, zero inflation, three-part model, regime switching, endogeneity, policy interest rate.


Policymakers' Votes and Predictability of Monetary Policy.
UCSD Economics Working Paper No. 1672194 

ABSTRACT: Though the vast majority of central banks currently entrust the conduct of monetary policy to a committee, only nine banks release the voting records of policymaking meetings, either immediately together with the policy decisions or within three weeks. Only in Poland are the voting records released with six weeks delay, after the subsequent policy meeting. This unique situation provides an interesting opportunity to investigate whether the disclosure of votes could help to predict the forthcoming policy decisions. Using real-time data, this paper shows that a prompter release of the voting records could improve the predictability of policy decisions. The voting patterns reveal strong and robust predictive content even after controlling for "policy bias" statements and responses to inflation, real activity, exchange rates and financial market indicators. They contain information not embedded in the spreads and moves in the market interest rates, nor in the explicit forecasts of the next policy decision made by market analysts in Reuters surveys. Moreover, the direction of policymakers' dissent explains the direction of analysts' forecast bias. These findings are based on the voting patterns only, without the knowledge of policymakers' names attached to each vote.
KEYWORDS: monetary policy; predictability; policy interest rate; MPC votes; real-time data


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