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I develop a population-based Markov chain Monte Carlo algorithm known as parallel tempering to estimate dynamic stochastic general equilibrium models. Parallel tempering approximates the posterior distribution of interest using a family of Markov chains with tempered posteriors.

Statistical inference--both estimation and testing--for stochastic volatility (SV) models is known to be challenging and computationally demanding. We propose simple and efficient estimators for SV models with conditionally heavy-tailed error distributions, particularly the Student’s t and Generalized Exponential Distributions (GED). The estimators rely on a small set of moment conditions derived from ARMA-type representations of SV models, with an option to apply “winsorization” to improve stability and finite-sample performance. Except for the degrees of-freedom parameter, closed-form expressions are available for all other parameters, extending Ahsan and Dufour (2019, 2021), thus eliminating the need for numerical optimization or initial values. We derive the estimators’ asymptotic distribution and show that, due to their analytical tractability, they support reliable, and even exact, simulation-based inference via Monte Carlo or bootstrap methods. We assess their performance through extensive simulations and demonstrate their practical relevance in financial return data, which strongly reject the normality assumption in favor of heavy-tailed models.

We show how Treasury demand shocks transmit to foreign exchange and bond markets globally. Higher Treasury demand weakens the U.S. dollar and raises foreign bond prices, with effects persisting for two weeks. The transmission varies predictably across countries based on their monetary policy alignment with the United States.

Recent research suggests that quantitative easing (QE) may affect a broad range of asset prices through a portfolio balance channel. Using novel security-level holding data of individual US mutual funds, we establish evidence that portfolio rebalancing occurred both within and across funds.

This paper studies the music streaming industry and argues that having exclusive rights granted by copyright law drives firms to offer exclusive content to lock in customers. I employ theoretical and descriptive empirical analysis, along with a dynamic structural model, to support the argument and explore policies for improving competition.

Economists disagree about the factors driving the substantial increase in residual wage inequality in the United States over the past few decades. To identify changes in the returns to unobserved skills, we make a novel assumption about the dynamics of skills (especially among older workers) rather than about the stability of skill distributions across cohorts, as is standard.

We draw on the Canadian experience to examine how monetary and macroprudential policies interact and possibly complement each other in achieving their respective price and financial stability objectives.

We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk.

To what extent does a central bank digital currency (CBDC) compete with bank deposits? To answer this question, we develop and estimate a structural model where each household chooses which financial institution to deposit their digital money with.

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The book is part of the National Currency Collection, Bank of Canada.
Photography by Gord Carter, Ottawa.