http://www.qeconomics.org/ojs/index.php/qe/issue/feedQuantitative Economics2015-05-04T00:00:00+00:00Claire Sashiclaire.sashi@gmail.comOpen Journal Systems<p>Ragnar Frisch, the first president of the <a class="red style1" href="http://www.econometricsociety.org/"><strong>Econometric Society</strong></a> envisioned the society as promoting studies that aim at the unification of the theoretical-quantitative and the empirical-quantitative approach to economic problems and that are penetrated by constructive and rigorous thinking.</p> <p><em> Quantitative Economics</em>, a new journal sponsored by the Econometric Society, is designed to provide a home for papers that fulfill this vision. As such, it will complement the role currently played by <em>Econometrica</em>.</p><p><em>Quantitative Economics</em> will be oriented towards empirical research that is rigorously informed by econometrics and/or economic theory and econometric and theory work that is empirically directed. This does not imply, however, that the journal does not welcome theoretical and computational papers. Theory has a place in the new journal if it has an obvious empirical orientation (such as work on identification or estimation and computational techniques with practical interest).</p><p>The work published by QE will be united by substance rather than methodology. We aim at covering a variety of applied fields, including labour economics, industrial organization, development and growth economics, macroeconomics, international economics, public finance and social economics.</p><p>QE’s editorial board will strive to reduce the length of the editorial process, keeping at a minimum multiple revision and trying to avoid delays while maintaining the highest standards in the editorial process. At the same time, the editorial board is especially interested in providing a forum for papers that are innovative beyond established types of analysis and are willing to challenge conventional ways of conducting empirical work.</p>http://www.qeconomics.org/ojs/index.php/qe/article/view/165Merging simulation and projection approaches to solve high-dimensional problems with an application to a new Keynesian model2015-05-04T14:14:40+00:00Lilia Maliarmaliarl@stanford.eduSerguei Maliarsmaliar@scu.eduWe introduce a numerical algorithm for solving dynamic economic models that merges stochastic simulation and projection approaches: we use simulation to approximate the ergodic measure of the solution,we cover the support of the constructed ergodic measure with a fixed grid, and we use projection techniques to accurately solve the model on that grid. The construction of the grid is the key novel piece of our analysis: we replace a large cloud of simulated points with a small set of “representative” points. We present three alternative techniques for constructing representative points: a clustering method, an ε-distinguishable set method, and a locally-adaptive variant of the ε-distinguishable set method. As an illustration, we solve one- and multi-agent neoclassical growth models and a large-scale new Keynesian model with a zero lower bound on nominal interest rates. The proposed solution algorithm is tractable in problems with high dimensionality (hundreds of state variables) on a desktop computer.2015-04-27T17:30:45+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/172Treatment response with social interactions: Partial identification via monotone comparative statics2015-05-04T14:14:40+00:00Natalia Lazzatinlazzati@umich.eduThis paper studies (nonparametric) partial identification of treatment response with social interactions. It imposes conditions motivated by economic theory on the primitives of the model, that is, the structural equations, and shows that they imply shape restrictions on the distribution of potential outcomes via monotone comparative statics. The econometric framework is tractable and allows for counterfactual predictions in models with multiple equilibria. Under three sets of assumptions, we identify sharp distributional bounds on the potential outcomes given observable data.We illustrate our results by studying the effect of police per capita on crime rates in New York state.2015-04-27T17:52:27+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/167A nondegenerate Vuong test2015-05-04T14:14:40+00:00Xiaoxia Shixshi@ssc.wisc.eduIn this paper, I propose a one-step nondegenerate test as an alternative to the classical Vuong (1989) tests. I show that the new test achieves uniformasymptotic size control in both the overlapping and the non-overlapping cases, while the classical Vuong tests do not.Meanwhile, the power of the new test can be substantially better than the two-step classical Vuong test and is not dominated by the one-step classical Vuong test. An extension to moment-based models is also developed. I apply the new test to the voter turnout data set of Coate and Conlin (2004) and find that it can yield model comparison conclusions different from those of the classical tests. The implementation of the new test is straightforward and can be done using theMATLAB and STATA routines that accompany this paper.2015-04-27T17:53:03+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/168Maximum likelihood inference in weakly identified dynamic stochastic general equilibrium models2015-05-04T14:14:40+00:00Isaiah Andrewsiandrews@mit.eduAnna Mikushevaamikushe@mit.eduThis paper examines the issue of weak identification in maximum likelihood, motivated by problems with estimation and inference in a multidimensional dynamic stochastic general equilibrium model.We show that two forms of the classical score (Lagrange multiplier) test for a simple hypothesis concerning the full parameter vector are robust to weak identification. We also suggest a test for a composite hypothesis regarding a subvector of parameters. The suggested subset test is shown to be asymptotically exact when the nuisance parameter is strongly identified. We pay particular attention to the question of how to estimate Fisher information and we make extensive use of martingale theory.2015-04-27T17:53:37+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/169Explaining the size distribution of cities: Extreme economies2015-05-04T14:14:40+00:00Marcus Berliantberliant@artsci.wustl.eduHiroki Watanabewatanabe.wustl@gmail.comThe empirical regularity known as Zipf’s law or the rank-size rule has motivated development of a theoretical literature to explain it. We examine the assumptions on consumer behavior, particularly about their inability to insure against the city-level productivity shocks, implicitly used in this literature. With either selfinsurance or insurance markets, and either an arbitrarily small cost of moving or the assumption that consumers do not perfectly observe the shocks to firms’ technologies, the agents will never move. Even without these frictions, our analysis yields another equilibrium with insurance where consumers never move. Thus, insurance is a substitute for movement. We propose an alternative class of models, involving extreme risk against which consumers will not insure. Instead, they will move, generating a Fréchet distribution of city sizes that is empirically competitive with other models.2015-04-27T17:54:00+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/170Time-consistent optimal fiscal policy over the business cycle2015-05-04T14:14:40+00:00Zhigang Fengz.feng2@gmail.comThis paper examines a dynamic stochastic economy with a benevolent government that cannot commit to its future policies. I consider equilibria that are timeconsistent and allow for history-dependent strategies. A new numerical algorithm is developed to solve for the set of equilibrium payoffs. For a baseline economy calibrated to the U.S. economy, the capital income tax with the highest social welfare is slightly procyclical, while the labor income tax is countercyclical. Compared with the data, this equilibrium provides a better account of the cyclical properties of U.S. tax policy than other solutions that abstract from history dependence. The welfare cost of no commitment is about 022% of aggregate consumption as compared to the Ramsey allocation with full commitment.2015-04-27T17:55:01+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/171Stepping stone and option value in a model of postsecondary education2015-05-04T14:14:40+00:00Nicholas Trachternicholas.trachter@rich.frb.orgA stepping stone arises in risky environments with learning and transferrable human capital. An example is the role played by academic two-year colleges in postsecondary education: Students, as they learn about the uncertain educational outcomes, can drop out or transfer up to harder and more rewarding schools, carrying a fraction of the accumulated human capital. A theory of education is built and contrasted empirically to find that (i) option value explains a large part of returns to enrollment, (ii) enrollment in academic two-year colleges is driven by the option to transfer up, and (iii) the value of the stepping stone is small.2015-04-27T17:55:28+00:00