RATS 9.

0: Programs Replicating Paper Results

rats 9.0 includes a number of example programs (and accompanying data files and procedures) for replicating
results from some important econometric papers. These files are found in separate subdirectories for each paper,
inside the PaperResults subdirectory of your main rats directory. Examples are provided for the following
papers:
Arellano and Bond (1991), Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Applica-
tion to Employment Equations, Review of Economic Studies, vol. 58, no. 2, pp. 277-97. Demonstrates dynam-
ic panel data models using GMM.
Aruoba, Diebold and Scotti (2009), Real-Time Measurement of Business Conditions, Journal of Business and
Economic Statistics, vol. 27, no. 4, pp. 417-427. This is a large-scale state-space model with mixed frequency
observables.
Bai, Lumsdaine and Stock (1998), Testing For and Dating Common Breaks in Multivariate Time Series,
Review of Economic Studies, vol. 65, no. 3, pp. 394-432. Calculates break statistics on a multivariate models
with a common break across all equations.
Bai and Perron (2003), Computation and analysis of multiple structural change models, Journal of Applied
Econometrics, vol. 18, no. 1, 1-22.
Baillie and Bollerslev (1989), The Message in Daily Exchange Rates: A Conditional Variance Tale, Journal of
Business and Economic Statistics, vol. 7, no. 3, pp. 297-305. Estimates univariate GARCH models with day-
of-the-week effects.
Baillie, Bollerslev and Mikkelson (1996), Fractionally Integrated Generalized Autoregressive Conditional Het-
eroskedasticity, Journal of Econometrics, vol. 74, pp. 3-30.
Balke and Fomby (1997), Threshold Cointegration, International Economic Review, vol 38, no 3, pp. 627-45.
Bauwens and Laurent(2005), A New Class of Multivariate Skew Densities, With Application to Generalized-
Autoregressive Conditional Heteroscedasticity Models, JBES, vol 23, pp 346-354.
Bernanke, Boivin and Eliasz (2005), Measuring the Effects of Monetary Policy: A Factor-augmented Vector
Autoregressive (FAVAR) Approach, Quarterly Journal of Economics, vol. 120, no 1, pp. 387-422.
Bernanke and Mihov (1998), Measuring Monetary Policy, Quarterly Journal of Economics, vol. 113, no. 3, pp.
869-902 (monthly data calculations). This includes maximum likelihood estimation of structural VARs, Mar-
kov switching estimate of an SVAR and Monte Carlo integration of a just identified SVAR.
Bjrnland and Leitemo (2009): Identifying the Interdependence between US Monetary Policy and the Stock
Market, Journal of Monetary Economics, vol. 56, no. 2, pp. 275-282. Examines a var model with short- and
long-run restrictions, including Monte Carlo integration of error bands for impulse responses.
Blanchard and Quah (1989), The Dynamic Effects of Aggregate Demand and Supply Disturbances, American
Economic Review, vol. 79, no. 4, pp. 655-673. Demonstrates several topics in VARs: historical decomposition,
recovery of structural shocks, long-run restrictions.
Bollerslev and Mikkelson (1996), Modeling and Pricing Long Memory in Stock Market Volatility, Journal of
Econometrics, vol. 73, no. 1, pp. 151-184. Estimates Fractionally Integrated garch and egarch models.
Burnside (1994), Hansen-Jagannathan Bounds as Classical Tests of Asset-Pricing Models, Journal of Business
& Economic Statistics, vol. 12, no 1, pp. 57-79.
Campbell and Ammer (1993), What Moves the Stock and Bond Markets? A Variance Decomposition for Long-
Term Asset Returns, J of Finance, vol. 48, pp. 3-37.
Cappiello, Engle and Sheppard (2006), Asymmetric Dynamics in the Correlations of Global Equity and Bond
Returns, Journal of Financial Econometrics, vol. 4, no. 4, pp. 537-572. Example of two-step estimates of vari-
ous DCC GARCH models.
 RATS 9.0: Paper Replication Example Programs
Carstenson (2006), Stock Market Downswing and the Stability of European Monetary Union Money
Demand, Journal of Business and Economic Statistics, vol. 24, no. 4, pp. 395-402. Demonstrates FM
OLS techniques and a Hansen stability test.
Chan, Karolyi, Longstaff and Sanders (1992), Comparison of Models of the Short-Term Interest Rate,
Journal of Finance, vol. 47, no. 3, pp. 1209-1227.
Chan and Maheu (2002), Conditional Jump Dynamics in Stock Market Returns, Journal of Business
and Economic Statistics, vol. 20, no. 3, pp. 377-389. This does constant and time-varying intensity
(arji) garch models.
Cushman and Zha(1997), Identifying monetary policy in a small open economy under flexible exchange
rates, Journal of Monetary Economics, vol 39, no 3, pp 433-448.
den Haan (2000) , The Comovement Between Output and Prices, Journal of Monetary Economics, vol.
46, no. 1, pp. 3-30. This analyzes the comovement of series using multi-step forecast errors in a VAR.
Dennis (2007), Optimal Policy in Rational Expectations Models: New Solution Algorithms, Macroeco-
nomic Dynamics, vol 11, 31-55. Demonstrates use of the @DSGEControl procedure.
Diebold, Rudebusch & Aruoba (2006), The macroeconomy and the yield curve: a dynamic latent factor
approach, Journal of Econometrics, vol. 131(1-2), 309-338.
Diebold and Yilmaz (2009), Measuring Financial Asset Return and Volatility Spillovers, with Applica-
tion to Global Equity Markets, Economic Journal, vol. 119, no. 534, pp. 158-171. Analyzes spillovers
in a multi-country VAR.
Dueker (1997), Markov Switching in garch Processes and Mean-Reverting Stock-Market Volatility,
Journal of Business & Economic Statistics, vol. 15, no. 1, pp. 2634. Implements Markov Switching
garch models.

Dueker (2005), Dynamic Forecasts of Qualitative Variables: A Qual VAR Model of U.S. Recessions,
Journal of Business & Economic Statistics, vol. 23, no. 1, pp. 96104. Estimates a VAR including a
binary choice endogenous variable.
Ehrmann, Ellison, Valla (2003), Regime-dependent Impulse Response Functions in a Markov-switching
Vector Autoregression Model, Economics Letters, vol. 78, pp. 295299. Estimates a Markov-switching
VAR with error band calculations for the IRFs.
Elder and Serletis (2010), Oil Price Uncertainty, Journal of Money, Credit, and Banking, vol. 42, no.
6, pp. 1137-1159. Estimates a var-garch-m model and computes error bands for impulse response
functions.
Enders and Granger (1998), Unit-Root Tests and Asymmetric Adjustment with an Example Using the
Term Structure of Interest Rates, Journal of Business and Economic Statistics, vol. 16, pp 304-11.
Enders and Siklos (2001), Cointegration and Threshold Adjustment, Journal of Business & Economic
Statistics, vol. 19, no. 2, pp. 16676. Presents an error correction model with threshold adjustments.
Erceg, Henderson and Levin (2000), Optimal Monetary Policy with Staggered Wage and Price Con-
tracts, Journal of Monetary Economics, vol. 46, no. 2, pp. 281-313. dsge model estimation and use of
@DLMIRF procedure.
Fabiani and Mestre (2004), A System Approach for Measuring the Euro Area NAIRU, Empirical Eco-
nomics, vol.. 29, no. 2, pp. 311-341. Demonstrates state-space model with multiple observables.
Faust (1998), The Robustness of Identified VAR Conclusions About Money, Carnegie-Rochester Con-
ference Series on Public Policy, vol. 49, pp. 207-244. Aimed at bounding the amount of the variance
in gdp that can be explained by a monetary policy shock, by maximizing the FEVD share of a shock
across all shocks that satisfy a set of sign constraints that could reasonably be produced by a (contrac-
tionary) monetary policy shock. This uses a different method for solving the maximization problem
than is proposed by Faust. It uses the existing constrained optimization capabilities of RATS rather
than a specialized eigenvalue solution.
 RATS 9.0: Paper Replication Example Programs
Faust and Leeper (1997), When Do Long-Run Identifying Restrictions Give Reliable Results, Journal
of Business & Economic Statistics, vol. 15, no. 3, pp. 345353. Examines small SVARs with short- and
long-run restrictions.
Filardo (1994), Business Cycle Phases and Their Transitional Dynamics, Journal of Business & Eco-
nomic Statistics, vol. 12, no 3, pp. 299-308. Demonstrates use of the @MSVARSetup procedure with
transition probabilities depending upon exogenous variables.
Fry and Pagan (2011), Sign Restrictions in Structural Vector Autoregressions: A Critical Review,
Journal of Economic Literature, vol. 49, no. 4, 938-60. Shows how to find the median target impulse
response.
Gali (1992), How Well Does the IS-LM Model Fit Postwar U.S. Data, Quarterly Journal of Economics,
vol. 107, no. 2, pp. 709-738. Demonstrates VARs with short and long run restrictions, particularly the
instruction CVMODEL and the @ShortandLong procedure.
Gali (1999), Technology, Employment and the Business Cycle: Do Technology Shocks Explain Aggregate
Fluctuations, American Economic Review, vol. 89, pp. 249-271.
Gonzalo and Granger (1995), Estimation of common long memory components in cointegrated systems,
Journal of Business and Economic Statistics, vol. 13, pp. 27-36. Demonstrates the procedure @JOHMLE
and the function %PERP.
Gray (1996), Modeling the Conditional Distribution of Interest Rates as a Regime-switching Process,
Journal of Financial Economics, vol. 42, pp. 27-62. Replicates work on Markov-switching GARCH
models.
Gregory and Hansen (1996), Residual-based Tests for Cointegration in Models with Regime Shifts,
Journal of Econometrics, vol. 70, no. 1, pp. 99-126. Demonstrates @GregoryHansen procedure.
Hafner and Herwartz (2006), Volatility Impulse Responses for Multivariate GARCH Models: An Ex-
change Rate Illustration, Journal of International Money and Finance, vol. 25, no. 5, pp. 719-740.
Hamilton and Susmel (1994), Autoregressive Conditional Heteroskedasticity and Changes in Regime,
Journal of Econometrics, vol. 64, pp. 307-333. Estimation of standard garch and arch models with
Markov Switching.
Hansen, Bruce (1996), Inference When a Nuisance Parameter is Not Identified Under the Null Hypoth-
esis, Econometrica, vol. 64, no. 2, pp. 413-430. Replication program for a setar model. Demonstrates
use of @TAR procedure.
Hansen, Bruce (1994), Autoregressive Conditional Density Estimation, International Economic Review,
vol 35, no. 3, pp. 705-730. This estimates garch models with student t errors with time-varying de-
grees of freedom, and introduces the skew-t density.
Hansen, Bruce (1997) Approximate Asymptotic PValues for Structural Change Tests, Journal of Busi-
ness and Economic Statistics, vol. 15, no. 1, pp. 6067. Example using the @APBREAKTEST procedure,
which uses Hansens approximate pvalues.
Hansen, Bruce (1999), Threshold Effects in Non-dynamic Panels: Estimation, Testing and Inference,
Journal of Econometrics, vol. 93, pp. 345368. Example using the @PANELTHRESH procedure for esti-
mation of threshold effects in a panel data set.
Hansen, Bruce (2000), Testing for Structural Change in Conditional Models, Journal of Econometrics,
vol. 97, no. 1, pp. 93-115. Demonstrates test for a structural break in a linear regression model with
fixed regressor bootstrap.
Hansen and Seo (2002), Testing for two-regime threshold cointegration in vector error-correction mod-
els, Journal of Econometrics, vol. 110, 293-318.
Harvey, Ruiz and Shepherd (1994), Multivariate Stochastic Variance Models, Review of Economic
Studies, vol. 61, no. 2, pp. 247-264.
 RATS 9.0: Paper Replication Example Programs
Holtz-Eakin, Newey and Rosen (1988), Estimating Vector Autoregressions with Panel Data, Economet-
rica, vol. 56, no. 6, pp. 1371-95. Panel VAR estimation, demonstrating the use of the @ABLAGS proce-
dure for generating Arellano-Bond instruments.
Inclan and Tiao (1994), Use of Cumulative Sums of Squares for Retrospective Detection of Changes in
Variance, Journal of the American Statistical Assocation, vol. 89, pp. 913-923.
Ireland (2004), A Method for Taking Models to the Data, Journal of Economic Dynamics and Control,
vol. 28, no. 6, pp. 1205-1226. Demonstrates use of DSGE instruction, combined with DLM, for estimat-
ing a dynamic model using maximum likelihood.
Jacquier, Polson and Rossi (1994), Bayesian Analysis of Stochastic Volatility Models, Journal of Busi-
ness and Economic Statistics, vol 12, no 4, pp. 371-89. Includes both a Metropolis mcmc and a rejec-
tion method similar to that in Kim, Shephard and Chib(1998), Stochastic Volatility: Likelihood Infer-
ence and Comparison with ARCH Models, Review of Economic Studies, vol 65, pp. 361-93.
King, Plosser, Stock and Watson (1991), Stochastic Trends and Economic Fluctuations, American Eco-
nomic Review, vol. 81, pp. 819-840. Demonstrates the procedures @SWDOLS, @SWTRENDS,
@JOHMLE and @FORCEDFACTOR.
Koop, Len-Gonzlez and Strachan (2010), Efficient Posterior Simulation for Cointegrated Models
with Priors on the Cointegration Space, Econometric Reviews, vol. 29, no. 2, pp. 224-242. This is an
example of the Gibbs sampling procedure for cointegrated models.
Koutmos(1996), Modeling the Dynamic Interdependence of Major European Stock Markets, Journal of
Business Finance and Accounting, vol 23, pp 975-988. This estimates a multivariate egarch model
with asymmetric volatility spillovers.
Krolzigs International Business Cycles: Regime Shifts in the Stochastic Process of Economic Growth,
Oxford University Discussion Paper. Demonstrates Markov switching and VAR models.
Lanne and Lutkepohl (2008), Identifying Monetary Policy Shocks via Changes in Volatility, Journal of
Money, Credit, and Banking, vol. 40, no. 6, pp. 1131-1149. Demonstrates identification of a structural
VAR using volatility regimes.
Lebo and Box-Steffensmeier (2008), Dynamic Conditional Correlations in Political Science, American
Journal of Political Science, vol. 53, no. 2, pp. 688-704. Demonstrates dcc garch models.
Lubik and Schorfheide (2007), Do Central Banks Respond to Exchange Rate Movements? A Structural
Investigation, Journal of Monetary Economics, vol. 54(4), pp. 1069-1087.
Mark and Sul (2003), Cointegration Vector Estimation by Panel DOLS and Long-run Money Demand,
Oxford Bulletin of Economics and Statistics, vol. 65, no. 5, pp. 655-680.
Michael, Nobay and Peel (1997), Transactions Costs and Nonlinear Adjustment in Real Exchange
Rates: An Empirical Investigation, Journal of Political Economy, vol. 105, no. 4, pp. 862-879. Esti-
mates estar models.
Morley, Nelson & Zivot (2003), Why Are the Beveridge-Nelson and Unobserved-Components Decomposi-
tions of GDP So Different?, The Review of Economics and Statistics, vol. 85(2), pp. 235-243. Demon-
strates state space modelling.
Mountford and Uhlig (2009), What are the Effects of Fiscal Policy Shocks?, Journal of Applied Econo-
metricsvol. 24(6), pp. 960-992. Demonstrates analysis of impulse responses with sign constraints, and
sign + zero constraints.
Ozbek and Ozlale (2005), Employing the extended Kalman filter in measuring the output gap, Journal
of Economic Dynamics and Control, vol. 29, no. 9, pp. 1611-1622. Demonstrates extended Kalman
filter.
Papell and Prodan (2006), Additional Evidence of Long Run Purchasing Power Parity with Restricted
Structural Change, Journal of Money, Credit, and Banking, vol. 38, no. 5, pp. 1329-1349. Does unit
root tests with one and two breaks using the @PerronBreaks procedure.
 RATS 9.0: Paper Replication Example Programs
Pedroni (2001) Purchasing Power Parity Tests in Cointegrated Panels, Review of Economics and Statis-
tics, vol. 83, pp. 727-731. Demonstrates the panel data procedures @PANELFM and @PANELDOLS.
Pedroni (2007), Social Capital, Barriers to Production and Capital Shares: Implications for the Impor-
tance of Parameter Heterogeneity from a Nonstationary Panel Approach, Journal of Applied Econo-
metrics, vol. 22, no. 2, pp. 429-451. This demonstrates the latest versions of @PANELFM and
@PANCOINT. Does a test for homogeneity of the cointegrating vectors.
Perron and Wada (2009), Lets take a break: Trends and cycles in US real GDP, Journal of Monetary
Economics, vol. 56, pp. 749-765. State space models.
Pesaran, Shin and Smith (1999), Pooled Mean Group Estimation of Dynamic Heterogeneous Panels,
Journal of the American Statistical Assocation, vol. 94, no. 446, pp. 621-634. Demonstrates the in-
struction SWEEP.
Quah and Vahey (1995), Measuring Core Inflation?, Economic Journal, vol. 105, pp. 1130-44. Demon-
strates use of the HISTORY instruction and the %BQFACTOR function.
Sims and Zha (1999), Error Bands for Impulse Responses, Econometrica, vol. 67, no. 5, pp. 1113-1156.
This includes calculation of error bands using Monte Carlo integration, bootstrapping and also in-
cludes IRFs for a structural VAR.
Sinclair (2009), The Relationships between Permanent and Transitory Movements in U.S. Output and
the Unemployment Rate, Journal of Money, Credit and Banking, vol. 41(2-3), pp. 529-542. State
space models.
Skalin and Terasvirta (1999), Another Look at Swedish Business Cyscles, 1861-1988, Journal of Ap-
plied Econometrics, vol. 14, no. 4, pp. 359-78. Estimation of star models for industrial production,
imports, and exports as well as a non-linear Granger causality test.
Terasvirta (1994), Specification, Estimation and Evaluation of Smooth Transition Autoregressive Mod-
els, Journal of the American Statistical Assocation, vol. 89, pp. 208-218. Demonstrates the proce-
dures @STARTEST, @YULELAGS, and @LAGPOLYROOTS.
Tsay (1998), Testing and Modeling Multivariate Threshold Models, Journal of the American Statisti-
cal Assocation, vol. 93, no. 443, pp. 1188-1202. Demonstrates use of RLS (recursive least squares) and
SWEEP instructions.
Tse, Y.K. (2000), A Test for Constant Correlations in a Multivariate GARCH Model, Journal of Econo-
metrics, 98, pp. 107-127. Implements Tses LM test for constant correlation in a multivariate garch
model.
Uhlig (2005), What are the effects of monetary policy on output? Results from an agnostic identification
procedure, Journal of Monetary Economics, vol. 52, pp. 381-419. Three programs replicating var
identification of impulse responses with sign restrictions from
Watson (1993), Measures of Fit for Calibrated Models, Journal of Political Economy, vol. 101, 1011-
1041. In addition to demonstrating Watsons measures of fit, it also demonstrates methods for solv-
ing dsge models. Watson uses the popular King, Plosser, and Rebelo model. This demonstrates the
procedures @SSMSPECTRUM, @VARSPECTRUM, and the instruction DSGE.
Willinger, Taqqu and Teverovsky (1999), Stock Market Prices and Long-Range Dependence, Finance
and Stochastics, vol. 3, pp. 1-13. Uses the procedures @HURST and @RSSTATISTIC, and demonstrates
state space models.
Wright (2000), Alternative Variance-Ratio Tests Using Ranks and Signs, Journal of Business and Eco-
nomic Statistics, vol. 18, 1-9. Demonstrates the procedure @VRATIO.
RATS 9.0: Paper Replication Example Programs