James D. Hamilton
Professor of Economics
James D. HamiltonProfessor of Economics |
|
University of California, San Diego
9500 Gilman Drive
La Jolla, CA 92093
E-mail: mailto:jhamilton@ucsd.edu
office: (858) 534-5986
FAX: (858) 534-7040
Understanding Crude Oil Prices. This paper examines the factors responsible for changes in crude oil prices. The paper reviews the statistical behavior of oil prices, relates these to the predictions of theory, and looks in detail at key features of petroleum demand and supply. Topics discussed include the role of commodity speculation, OPEC, and resource depletion. The paper concludes that although scarcity rent made a negligible contribution to the price of oil in 1997, it may be an important feature of the most recent data.
Macroeconomics and ARCH. Although ARCH-related models have proven quite popular in finance, they are less frequently used in macroeconomic applications. In part this may be because macroeconomists are usually more concerned about characterizing the conditional mean rather than the conditional variance of a time series. This paper argues that even if one's interest is in the conditional mean, correctly modeling the conditional variance can still be quite important, for two reasons. First, OLS standard errors can be quite misleading, with a "spurious regression" possibility in which a true null hypothesis is asymptotically rejected with probability one. Second, the inference about the conditional mean can be inappropriately influenced by outliers and high-variance episodes if one has not incorporated the conditional variance directly into the estimation of the mean, and infinite relative efficiency gains may be possible. The practical relevance of these concerns is illustrated with two empirical examples from the macroeconomics literature, the first looking at market expectations of future changes in Federal Reserve policy, and the second looking at changes over time in the Fed's adherence to a Taylor Rule. A description of the paper written for a general audience can be found here.
Daily Monetary Policy Shocks and the Delayed Response of New Home Sales. Forthcoming in Journal of Monetary Economics. This paper argues that a change in the fed funds target begins to affect the economy as soon as it becomes anticipated by markets, with innovations in mortgage rates driven in part by innovations in the level and slope of the term structure of expected near-horizon fed funds rates. Despite this instantaneous anticipatory response of mortgage rates, the consequences for housing of a change in monetary policy are drawn out over a long period of time due to heterogeneity across households in time required to purchase a home. This framework facilitates detailed measurement and interpretation of the time lags relating monetary policy to the housing market, and motivates a daily index that can be used to summarize the current and future economic implications of recent Fed policy changes. I've also written two articles summarizing this paper for a more general audience: [1], [2]. For a quick illustration of how these estimates relate to developments in January 2008, see this analysis.
Daily Changes in Fed Funds Futures Prices. Forthcoming in Journal of Money, Credit, and Banking. Originally part of the preceding paper, this is now split off as a separate study documenting the time series properties of daily changes in the prices of fed funds futures contracts. The paper finds these contracts to be excellent predictors of the fed funds rate. Although some violations of the martingale hypothesis are uncovered, the economic significance of these for daily price changes appears to be quite small. An article summarizing this paper for a general audience is available at Econbrowser.
Oil and the Macroeconomy. This surveys the literature on the macroeconomic effects of oil shocks. Prepared for the second edition of the New Palgrave Dictionary of Economics.
Regime-Switching Models. This surveys the literature on Markov-switching models. Prepared for the second edition of the New Palgrave Dictionary of Economics.
One application of my research has been new algorithms for determining when economic recessions begin and end. This originated with my 1989 article in Econometrica. Data and software used in these methods can be accessed by following this link. The current value of an index based on the most recently released quarterly GDP figures is reported at Econbrowser. For recent values using multivariate monthly indicators, see Marcelle Chauvet's analysis of starting and ending dates for the most recent U.S. recession, and also her interesting analysis with Jeremy Piger.
A recent exchange about "A Comparison of Two Business Cycle Dating Methods" by Don Harding at the University of Melbourne and Adrian Pagan at Austrlian National University, can be accessed here. Their rejoinder may also be of interest. This exchange appeared in the Journal of Economic Dynamics and Control,July 2003.
One of my research interests over the years has concerned the economic consequences of oil price shocks, including a number of papers listed under Recent publications. Analysis of current economic conditions is available at Econbrowser. For a slightly more technical answer to the general question of what my research implies about the fraction of typical U.S. postwar recessions could be attributed to the oil shocks themselves, see Historical Effects of Oil Shocks. A case study is also available as a teaching aid to lead students in investigating the effects of and policy responses to oil shocks.
The research described here is based upon work supported by the National Science Foundation under grants SBR-9707771, SES-0076072, and NSF-0215754. Any opinions, findings and conclusions or recomendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the National Science Foundation (NSF).
Assessing Monetary Policy Effects Using Daily Federal Funds Futures Contracts, Federal Reserve Bank of St. Louis Review, July/August 2008, pp. 377-393.
Inside the Economist's Mind: A Book Review, Macroeconomic Dynamics, 2008, vol. 12, pp. 112-116.
Commentary: Housing and the Monetary Transmission Mechanism, in Housing, Housing Finance, and Monetary Policy, 2007, Federal Reserve Bank of Kansas City, pp. 415-422.
Normalization in Econometrics, coauthored with Tao Zha and Dan Waggoner . Econometric Reviews, 2007, vol 26, no 2-4, pp. 221-252. Click here to download computer code used in the analysis.
Dating Business Cycle Turning Points, co-authored with Marcelle Chauvet. In Nonlinear Time Series Analysis of Business Cycles, edited by Costas Milas, Philip Rothman, and Dick van Dijk, Elsevier, North Holland, 2006.
Computing Power and the Power of Econometrics, Medium Econometrische Toepessingen, 2006, volume 14, number 2, pp. 32-38.
"What's Real About the Business Cycle?" Federal Reserve Bank of St. Louis Review, July/August 2005, 87(4), pp. 435-452. Click here to download computer code and data sets used in the analysis.
"Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy," Journal of Money, Credit, and Banking, April 2004, vol. 36, pp. 265-286. Co-authored with Anna Maria Herrera. Click here to see a copy of the paper or to download data and programs.
"Why Are Prices Sticky? The Dynamics of Wholesale Gasoline Prices," Journal of Money, Credit and Banking, February 2004, vol. 36, pp. 17-37. Co-authored with Michael Davis. Paper can be downloaded as can the data and software used in the study.
"What Is an Oil Shock?" Journal of Econometrics, April 2003, vol. 113, pp. 363-398. A working paper version can be downloaded
as can the data and software used in the study.
"A Model for the Federal Funds Rate Target," Journal of Political Economy,
October 2002, vol. 110, pp. 1135-1167. Co-authored with
Oscar Jorda.
A working paper version can be downloaded
as can the data and software used in the study. Real-time forecasts of what the Fed will do next are published
in the Italian newsletter Money
Market Monitor "On the Interpretation of Cointegration in the Linear-Quadratic Inventory
Model," Journal of Economic Dynamics and Control, October 2002,
vol. 26, pp. 2037-2049. Working paper version can be downloaded. "A Re-Examination of the Predictability of the Yield Spread for Real Economic
Activity," Journal of Money, Credit, and Banking, May 2002, vol. 34, pp. 340-360.
Co-authored with Dong Heon Kim
Working paper version
can be downloaded as can the data and
software used in the study.
Advances in Markov-Switching Models, Co-edited with Baldev Raj. Physica-Verlag, 2002. "A Parametric Approach to Flexible Nonlinear Inference," Econometrica,
May 2001, vol. 69. Working paper version can be downloaded,
as can the data and
software used in this study. "The Supply and Demand for Federal Reserve Deposits,"
Carnegie-Rochester Conference Series on Public Policy, December 1998,
vol. 49. Working paper version (missing figures and some mathematical symbols)
can be downloaded,
as can the data and software
used in the study. "The Augmented Solow Model and the Productivity Slowdown," Journal
of Monetary Economics, Dec. 1998, vol. 42 (coauthored with Josefina
Monteagudo).
"Measuring the Liquidity Effect," American Economic Review, March
1997. Click here to Journal of Applied Econometrics,
Sept.-Oct. 1996, vol. 11, no. 5, (coauthored with Gang Lin). Click here
to download data and software "This Is What Happened to the Oil Price/Macroeconomy Relation," Journal
of Monetary Economics, , Oct. 1996 "The Daily Market for Federal Funds," Journal of Political Economy,
Feb. 1996. Click here to
download data and software "Specification Testing in Markov-Switching Time-Series Models", Journal
of Econometrics, Jan. 1996. Click here to download data
and software "What Do the Leading Indicators Lead?", Journal of Business, Jan.
1996 (coauthored with Gabriel Perez-Quiros). Click here to
download
data and software. 
Time Series Analysis, Princeton Univ. Press, 1994. Click here to order from amazon.com or click here to download data and programs to implement examples from the text. Here is a list of items that have updated or corrected from the earlier printings. If you have other suggestions to add to this list, please let me know. Click on pictures at right to order Japanese translation (two-volume set).
"Autoregressive Conditional Heteroskedasticity and Changes in Regime," Journal of Econometrics, September/October 1994 (coathored with Raul Susmel). Click here to download data and software.
"State-Space Models," Handbook of Econometrics, Volume 4, , edited by R. Engle and D. McFadden, North-Holland, 1994. Click here to download data and software.
"Estimation, Inference, and Forecasting of Time Series Subject to Changes in Regime," Handbook of Statistics, Volume 11, edited by G. S. Maddala, C. R. Rao, and H. D. Vinod, North-Holland, 1993.
"Was the Deflation During the Great Depression Anticipated? Evidence from the Commodity Futures Market," American Economic Review, March 1992. Click here to download data and software.
"A Quasi-Bayesian Approach to Estimating Parameters for Mixtures of Normal Distributions," Journal of Business and Economic Statistics, Jan. 1991. Click here to download data and software.
"Long Swings in the Dollar: Are They in the Data and Do Markets Know It?", American Economic Review, Sept. 1990 (coauthored with Charles Engel). Click here to download data and software.
"Analysis of Time Series Subject to Changes in Regime," Journal of Econometrics, July/August 1990. Click here to download data and software.
"A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica , March 1989. Click here to download data and software.
"Rational Expectations Econometric Analysis of Changes in Regime: An Investigation of the Term Structure of Interest Rates," Journal of Economic Dynamics and Control, June/Sept. 1988
"A Neoclassical Model of Unemployment and the Business Cycle," Journal of Political Economy, June 1988
"The Role of the International Gold Standard in Propagating the Great Depression," Contemporary Policy Issues, April 1988
"Monetary Factors in the Great Depression," Journal of Monetary Economics, March 1987
"A Standard Error for the Estimated State Vector of a State-Space Model," Journal of Econometrics, Dec. 1986