Kenneth D. West’s research while affiliated with University of Wisconsin–Madison and other places

... The production costs for businesses rise and are likely to be passed on to consumers in the form of higher prices for consumer goods. The inflation rate increases as a consequence [5]. As a result, there will always be a trade-off between inflation and full employment for the policymakers in the Federal Reserve to carefully consider about. ...

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Analysis of Interest Rate Hikes and Exchange Rate Between U.S. and China

... Empirically, Lunsford and West (2019) conclude demographic variables can explain some of the variability in U.S. real interest rates over more than one hundred years, while Fiorentini et al. (2018) highlight the importance of the share of young workers in accounting for the rise and fall of real rates between 1960 and 2016. Our empirical analysis expands on this second paper. ...

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Demographics and Real Interest Rates Across Countries and Over Time

... • blocksize is the block size for the block bootstrapping, want to bias adjust. Code uses bias adjustment from West and Zhao (2019). See bias code folder in the replication files and West and Zhao (2019) for more details. ...

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Local projections, autocorrelation, and efficiency

... In Table 2 we report coefficient estimates, adjusted Rsquared and F-statistics. The Newey-West standard error [55] with lag = 5 is shown in parenthesis under the coefficient estimates, and the statistical significance levels are indicated by the stars. ...

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Impact of the COVID-19 pandemic on the stock market and investor online word of mouth

... 5 The economic forces reducing the equilibrium real interest rate likely include lower productivity growth, changing demographics, a decline in the price of capital goods, and strong precautionary saving flows from emerging market economies, which have tended to increase global savings, reduce desired investment, and push down the steady-state real interest rate. Discussions include Summers (2014), Kiley (2015), Rachel and Smith (2015), Hamilton et al. (2016), Laubach and Williams (2016), Johannsen andMertens (2016, 2018), Christensen and Rudebusch (2017), Del Negro et al. (2017), Holston et al. (2017) and Lunsford and West (2017). In macroeconomics, r * t is often labeled the neutral or natural rate of interest although, as noted below, there can be subtle dfferences among various definitions. ...

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Interest Rates Under Falling Stars

... average R 2 from these estimations across all years. In the spirit of Campbell and Thompson (2008) and Clark and West (2006), if the realized growth rate series is truly unpredictable, then in a finite sample the predictive regression will on average have a higher mean squared prediction error. Therefore, the expected R 2 under the null of unpredictability is negative, and a 0 or positive R 2 can be interpreted as evidence of predictability. ...

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Valuation and Long-Term Growth Expectations

... The models in competition are the continuous-time three-and five-factor AFDNS models, the fourand five-factor CKLS models on one side, and the more parsimonious univariate and vector autoregressive (AR and VAR) models, and the random walk process, on the other side. The out-of-sample model performances are evaluated using formal statistical tests including the equal predictability tests of Diebold and Mariano (1995) and Clark and West (2007), as well as the superior predictive ability (SPA) test of Hansen (2005) and the model confidence set of Hansen et al. (2011) (hereafter, MCS). ...

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A comparison of multi-factor term structure models for interbank rates

... is a kernel function, and M > 0 is the associated kernel bandwidth parameter. In this section, we use the Bartlett kernel with M set equal to the integer part of 4(T/100) 2/9 , as recommended by Newey and West (1994). As Moon et al. (2014) show, provided that their linear process assumption is met, the local power envelope is unaffected by the HAC modification to account for serial correlation. ...

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Optimal Panel Unit Root Testing with Covariates

... The data for short-term nominal interest rate are either overnight or three-month official rates (see Table A3 for details). To construct expected inflation, we follow the approach in Hamilton et al. (2016) and calculate the one-year-ahead forecast from AR (1) ...

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Demographics and Real Interest Rates Across Countries and Over Time

... Forecast precision in economic models has long been critical in financial decision making, with significant advances in methodologies and tools over time (Brandl et al., 2006;Pincheira & West, 2016). The seminal work of Meese and Rogoff (1983) in 1983 catalyzed a shift in focus toward prediction evaluation in economic models, particularly in the context of exchange rates (Engel et al., 2007). ...

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Machine Learning-Based Time Series Prediction at Brazilian Stocks Exchange