Omer discussant Luke M PhD Conference 2012

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Omer discussant Luke M PhD Conference 2012

  1. 1. Fixed  Investment,  uncertainty  and   financial  markets  vola7lity  in  Japan   Author  Luke  Meehan   Discussant  Omer  Majeed  
  2. 2. Strengths     •  Interes7ng  topic.     •  Methodologically  sound.     •  A  novel  approach.  Using  TVP-­‐VAR,  along  with   Bayesian  methods.  
  3. 3. Sugges7on/comments   •  Posterior  can  be  quite  sensi7ve  to  priors.     o  Karagedikli  et  al  (2010),  “RBCs  and  DSGEs:   the  computa7onal  approach  to  business   cycle  theory  and  evidence",  Journal  of   Economic  Surveys.   •  Should  under  take  sensi7vity  analysis  to  see  if   posterior  is  prior  driven  or  likelihood  driven.  
  4. 4. Sugges7on/comments   •  Bayesian  techniques  adapted  to  deal  with  model   uncertainty.   •  There  usually  is  considerable  model  uncertainty   with  these  models.   –  Variables  to  choose  (unit  labour  costs  etc,  integrated   health  of  world  economy  and/or  financial  markets   maer);   –  Cointegra7on  rank;   –  Lag  length;  and   –  Structural  breaks.  
  5. 5. Sugges7on/comments   •  Could  construct  a  reasonable  model  space  and   use  Bayesian  Method  Averaging  to  see  how   robust  your  results  are.     o  Garra,  Koop,  Mise  and  Vahey  (2009)  “Real-­‐ 7me  predic7on  with  UK  monetary  aggregates   in  the  presence  of  model  uncertainty",   Journal  of  Business  and  Economic  Sta7s7cs,   27(4),  480-­‐491  
  6. 6. Sugges7on/comments   •  Sample  size.  (September  1987  to  February   2011).  Why?  
  7. 7. Sugges7on/comments   •  Some  interes7ng  results.  Which  need  to  be  explained.     •  For  example  :   •  “Posi7ve  spikes  in  machinery  investment  deliver  short-­‐   and  long-­‐term  Tankan  falls.  This  indicates,  according  to   the  assump7ons  made  here  about  the  strong  link   between  Tankan  business-­‐confidence  and  uncertainty,   that  increasing  the  fixed  produc7ve  capacity  of  firms   on  a  macro  scale  increases  macro-­‐level  uncertainty.   This  inverse  rela7onship  between  investment  and   confidence  requires  further  study.”  
  8. 8. In  conclusion   •  A  very  novel  approach  to  looking  at  fixed   investment,  uncertainty  and  financial  markets.   •   Sound  methodology.       •  May  be  the  sugges7ons  given  will  help.  

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