University of California, San Diego

Department of Economics, 0508

9500 Gilman Drive

La Jolla, CA 92093

Directions to Econ Building

E-mail: mailto:jhamilton@ucsd.edu

Phone:

office: (858) 534-5986

FAX: (858) 534-7040

Biographical information

Curriculum Vitae

Econbrowser blog

Publications

Current working papers

Download computer software and data sets

Links to economists at central banks

Links to some of my former students

Teaching materials

Current Working Papers

Oil Prices, Exhaustible Resources, and Economic Growth. This paper explores details behind the phenomenal increase in global crude oil production over the last century and a half and the implications if that trend should be reversed. I document that a key feature of the growth in production has been exploitation of new geographic areas rather than application of better technology to existing sources, and suggest that the end of that era could come soon. The economic dislocations that historically followed temporary oil supply disruptions are reviewed, and the possible implications of that experience for what the transition era could look like are explored.

Risk Premia in Crude Oil Futures Prices, coauthored with Cynthia Wu. If commercial producers or financial investors use futures contracts to hedge against commodity price risk, the arbitrageurs who take the other side of the contracts may receive compensation for their assumption of nondiversifiable risk in the form of positive expected returns from their positions. We show that this interaction can produce an affine factor structure to commodity futures prices, and develop new algorithms for estimation of such models using unbalanced data sets in which the duration of observed contracts changes with each observation. We document significant changes in oil futures risk premia since 2005, with the compensation to the long position smaller on average but more volatile in more recent data. This observation is consistent with the claim that index-fund investing has become more important relative to commerical hedging in determining the structure of crude oil futures risk premia over time.

Historical Oil Shocks. This paper surveys the history of the oil industry with a particular focus on the events associated with significant changes in the price of oil. Although oil was used much differently and was substantially less important economically in the nineteenth century than it is today, there are interesting parallels between events in that era and more recent developments. Key post-World-War-II oil shocks reviewed include the Suez Crisis of 1956-57, the OPEC oil embargo of 1973-1974, the Iranian revolution of 1978-1979, the Iran-Iraq War initiated in 1980, the first Persian Gulf War in 1990-91, and the oil price spike of 2007-2008. Other more minor disturbances are also discussed, as are the economic downturns that followed each of the major postwar oil shocks.

Testable Implications of Affine-Term-Structure Models, coauthored with Cynthia Wu, forthcoming in Journal of Econometrics. Affine-term-structure models have been used to address a wide range of questions in macroeconomics and finance. This paper investigates a number of their testable implications which have not previously been explored. We show that the assumption that certain specified yields are priced without error is testable, and find that the implied measurement or specification error on other yields exhibits serial correlation in all of the possible formulations investigated here. We further find that the predictions of these models for the average levels of different interest rates are inconsistent with the observed data, and propose a more general specification that is not rejected by the data.

The Propagation of Regional Recessions, coauthored with Michael T. Owyang of the Federal Reserve Bank of St. Louis, forthcoming in Review of Economics and Statistics. This paper develops a framework for inferring common Markov-switching components in a panel data set with large cross-section and time-series dimensions. We apply the framework to studying similarities and differences across U.S. states in the timing of business cycles. We hypothesize that there exists a small number of cluster designations, with individual states in a given cluster sharing certain business cycle characteristics. We find that although oil-producing and agricultural states can sometimes experience a separate recession from the rest of the United States, for the most part differences across states appear to be a matter of timing, with some states beginning a national recession or recovery before others.

Selected publications (chronological)

Identification and Estimation of Gaussian Affine Term Structure Models, Journal of Econometrics, 168, no. 2 (June 2012): 315-331. Coauthored with Jing Cynthia Wu. Working paper version here. Click here for software to implement these procedures

Commentary: Import Prices and Inflation, International Journal of Central Banking, March 2012, vol. 8, no. 1, pp. 271-279.

The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment, Journal of Money, Credit, and Banking, 44, no. 1 (Supplement, February 2012): 3-46. Coauthored with Jing Cynthia Wu. Working paper version here. Click here to access the database developed for this paper.

"Nonlinearities and the Macroeconomic Effects of Oil Prices," Macroeconomic Dynamics, 2011, vol. 15, Supplement 3, pp. 364-378. Working paper version here.

"Calling Recessions in Real Time," International Journal of Forecasting October-December 2011, vol. 27, no. 4, pp. 1006-1026. Working paper version here.

"Estimating the market-perceived monetary policy rule", American Economic Journal: Macroeconomics, July 2011, vol. 3, pp. 1-28. Co-authored with Seth Pruitt and Scott Borger. Working paper version here and a description of the paper written for a general audience can be found here.

"Sources of Variation in Holding Returns for Fed Funds Futures Contracts", Journal of Futures Markets, 2011, vol. 31, No. 3, pp. 205-229. Co-authored with Tatsuyoshi Okimoto. Working paper version here.

Macroeconomics and ARCH, in Festschrift in Honor of Robert F. Engle, pp. 79-96, edited by Tim Bollerslev, Jeffry R. Russell and Mark Watson, Oxford University Press, 2010. Description of the paper for a general audience here.

Causes and Consequences of the Oil Shock of 2007-08, Brookings Papers on Economic Activity, Spring 2009: 215-259. Articles summarizing this paper for a more general audience: [1] (causes); [2] (consequences). Working paper version here. Also available are data and software to reproduce any of the results in this paper.

Concerns about the Fed's New Balance Sheet, in The Road Ahead for the Fed, edited by John D. Ciorciari and John B. Taylor, Stanford: Hoover Institution Press, 2009. Working paper draft available here. Book can be ordered from Amazon here.

Oil Prices and the Economic Downturn, testimony before the Joint Economic Committee of the United States Congress, May 20, 2009.

Daily Changes in Fed Funds Futures Prices, Journal of Money, Credit, and Banking June 2009, vol. 41, no. 4, pp. 567-582. Working paper version here. An article summarizing this paper for a general audience is available at Econbrowser.

Understanding Crude Oil Prices, Energy Journal 2009, vol 30, no. 2, pp. 179-206. Working paper version here, slides for talk available here.

Daily Monetary Policy Shocks and New Home Sales, Journal of Monetary Economics 55 (2008), pp. 1171-1190. Articles summarizing this paper for a more general audience: [1], [2]. For an illustration of how these estimates relate to developments in January 2008, see this analysis.

Oil and the Macroeconomy, in New Palgrave Dictionary of Economics, 2nd edition, edited by Steven Durlauf and Lawrence Blume, Palgrave McMillan Ltd., 2008.

Regime-Switching Models, in New Palgrave Dictionary of Economics, 2nd edition, edited by Steven Durlauf and Lawrence Blume, Palgrave McMillan Ltd., 2008.

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.

"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 download data and software

"Stock Market Volatility and the Business Cycle," 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

"On the Limitations of Government Borrowing: A Framework for Empirical Testing," American Economic Review, September 1986, pp. 808-819, (coauthored with Marjorie A. Flavin).

"Kalman Filter Estimation of Unobserved Monthly Expectations of Inflation," Journal of Business and Economic Statistics, April 1986, pp. 147-160, (coauthored with Edwin Burmeister and Kent D. Wall).

"Uncovering Financial Market Expectations of Inflation," Journal of Political Economy, December, 1985, pp. 1224-1241.

"The Observable Implications of Self-Fulfilling Expectations," Journal of Monetary Economics, November 1985, pp. 353-373, (coauthored with Charles H. Whiteman).

"Historical Causes of Postwar Oil Shocks and Recessions," Energy Journal, January 1985, pp. 97-116.

"Oil and the Macroeconomy Since World War II," Journal of Political Economy, April 1983, pp. 228-248.

"Dynamics of Terrorism," International Studies Quarterly, March 1983, pp. 39-54, (coauthored with Lawrence C. Hamilton).

"Models of Social Contagion," Journal of Mathematical Sociology, June 1981, pp. 133-160, (coauthored with Lawrence C. Hamilton).

Research support

Some of the research described above 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).