VC - A Method for Estimating Time-Varying Coefficients in Linear Models

Schlicht, Ekkehart

doi:10.2139/ssrn.3525248

Cited by 12 publications

(26 citation statements)

References 4 publications

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“…Equations (2) and (3) are jointly estimated using the varying‐coefficient (VC) model proposed by Schlicht (2003). In this approach, the variances

{\sigma }_{i}^{2}

are calculated by a method‐of‐moments estimator that coincides with the maximum‐likelihood estimator via the Kalman filter if the time series are sufficiently long and if the variance ratios are properly estimated (see Schlicht & Ludsteck, 2006; Schlicht, 2003 for more details). This VC method can be viewed as a straightforward generalization of the method of least squares.…”

Section: Methodology and Datamentioning

confidence: 99%

“…The approach proposed by Schlicht (2003) is very similar to that used by Aghion and Marinescu (2008). The main difference is in the computation of the variances

{\sigma }_{i}^{2}

.…”

Section: Methodology and Datamentioning

confidence: 99%

“…The main difference is in the computation of the variances

{\sigma }_{i}^{2}

. Aghion and Marinescu (2008) used the Markov chain Monte Carlo method to approximate these variances, whereas Schlicht (2003) used a method‐of‐moments estimator 11. Schlicht and Ludsteck (2006) compared the performance of the moment estimator and the Kalman smoother in terms of the mean squared error on simulated data, and concluded that the moment estimator outperforms the Kalman filter for small samples up to 100 observations.…”

Section: Methodology and Datamentioning

confidence: 99%

See 2 more Smart Citations

Do credit rating agencies reward fiscal prudence?

Jalles

2022

International Finance

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Governments are responsible for economic policy implementation, and their actions affect financial and capital market outcomes. Specifically, the way fiscal policy is conducted matters when credit agencies have to decide on how to rate a sovereign. This paper empirically assesses the effect of a new time‐varying measure of fiscal counter‐cyclicality on the sovereign credit ratings of the main agencies: Fitch, Standard & Poor's, and Moody's. I focus on a heterogeneous sample of 63 advanced and developing economies between 1980 and 2015. First, we find that the degree of fiscal counter‐cyclicality is generally positive and has been increasing over time, being larger in advanced economies. Second, the more counter‐cyclical a fiscal policy is, the better the assessment a rating agency gives to that country, particularly if it is an advanced one. This suggests that fiscal prudence and stabilization concerns are rewarded. Our results are robust to several sensitivity and robustness checks.

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“…Equations (2) and (3) are jointly estimated using the varying‐coefficient (VC) model proposed by Schlicht (2003). In this approach, the variances

{\sigma }_{i}^{2}

Section: Methodology and Datamentioning

confidence: 99%

“…The approach proposed by Schlicht (2003) is very similar to that used by Aghion and Marinescu (2008). The main difference is in the computation of the variances

{\sigma }_{i}^{2}

.…”

Section: Methodology and Datamentioning

confidence: 99%

“…The main difference is in the computation of the variances

{\sigma }_{i}^{2}

Section: Methodology and Datamentioning

confidence: 99%

See 1 more Smart Citation

Do credit rating agencies reward fiscal prudence?

Jalles

2022

International Finance

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show abstract

“…According to the literature already mentioned, this method to get timevarying coefficients has multiple advantages, namely the reduction of reverse causality. As regarding the application of the said method, we use the software VC -A Program for Estimating Time-Varying Coefficients, provided by Schlicht (2021) which executes his method and returns the values for βi,t.…”

Section: Measuring Cyclicalitymentioning

confidence: 99%

Time-varying cyclicality of fiscal policy: The case of the Euro area

Afonso

Carvalho

2022

The North American Journal of Economics and Finance

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“…We distinguish between high and low fiscal sustainability regimes by implementing a time-varying fiscal reaction function (Bohn, 1998) using the method of Schlicht (2003Schlicht ( , 2021.…”

Section: Introductionmentioning

confidence: 99%

Monetary Policy Surprise Shocks Under Different Fiscal Regimes: A Panel Analysis of the Euro Area

Afonso,

Alves,

Ionta

2023

SSRN Journal

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VC - A Method for Estimating Time-Varying Coefficients in Linear Models

Cited by 12 publications

References 4 publications

Do credit rating agencies reward fiscal prudence?

Do credit rating agencies reward fiscal prudence?

Time-varying cyclicality of fiscal policy: The case of the Euro area

Monetary Policy Surprise Shocks Under Different Fiscal Regimes: A Panel Analysis of the Euro Area

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