This paper extends the diffusion index (DI) forecast approach of Stock and Watson (1998, 2002) to the case of possibly nonlinear dynamic factor models. When the number of series is large, a two-stepâ€¦ (More)

The natural rate is the equilibrium rate under flexible prices, and the gap is the difference between the actual and natural rates. Since prices adjust eventually, the Beveridgeâ€“Nelson (Bâ€“N)â€¦ (More)

The consumption Euler equation implies that the output growth rate and the real interest rate are of the same order of integration; i.e., if the real interest rate is I(1), then so is the outputâ€¦ (More)

One income distribution is preferable to another under any increasing and Schur-concave (S-concave) social welfare function if and only if the generalized Lorenz (GL) curve of the first distributionâ€¦ (More)