nep-ets New Economics Papers
on Econometric Time Series
Issue of 2009‒10‒17
three papers chosen by
Yong Yin
SUNY at Buffalo

  1. Macroeconomic Forecasting and Structural Change By Antonello D'Agostino; Luca Gambetti; Domenico Giannone
  2. Minimum Distance Estimation and Testing of DSGE Models from Structural VARs By Fève, P.; Matheron, J.; Sahuc, J-G.
  3. Closed form asymptotics for local volatility models By Wen Cheng; Nick Costanzino; John Liechty; Anna Mazzucato; Victor Nistor

  1. By: Antonello D'Agostino; Luca Gambetti; Domenico Giannone
    Abstract: The aim of this paper is to assess whether explicitly modeling structural change increases the accuracy of macroeconomic forecasts. We produce real time out-of-sample forecasts for inflation, the unemployment rate and the interest rate using a Time-Varying Coe±cients VAR with Stochastic Volatility (TV-VAR) for the US. The model generates accurate predictions for the three variables. In particular for inflation the TV-VAR outperforms, in terms of mean square forecast error, all the competing models: fixed coefficients VARs, Time-Varying ARs and the naaive random walk model. These results are also shown to hold over the most recent period in which it has been hard to forecast inflation.
    Keywords: Forecasting, infation, stochastic Volatility, time varying vector autoregression.
    JEL: C32 E37 E47
    Date: 2009
  2. By: Fève, P.; Matheron, J.; Sahuc, J-G.
    Abstract: The aim of this paper is to complement the MDE--SVAR approach when the weighting matrix is not optimal. In empirical studies, this choice is motivated by stochastic singularity or collinearity problems associated with the covariance matrix of Impulse Response Functions. Consequently, the asymptotic distribution cannot be used to test the economic model's fit. To circumvent this difficulty, we propose a simple simulation method to construct critical values for the test statistics. An empirical application with US data illustrates the proposed method.
    Keywords: MDE, SVAR, DSGE models.
    JEL: C15 C32 E32
    Date: 2009
  3. By: Wen Cheng; Nick Costanzino; John Liechty; Anna Mazzucato; Victor Nistor
    Abstract: We obtain new closed-form pricing formulas for contingent claims when the asset follows a Dupire-type local volatility model. To obtain the formulas we use the Dyson-Taylor commutator method re- cently developed in [7, 8, 10] for short time asymptotic expansions of heat kernels, and obtain a family of general explicit closed form approx- imate solutions for both the pricing kernel and derivative price. We also perform analytic as well as a numerical error analysis, and compare our results to other known methods.
    Date: 2009–10

This nep-ets issue is ©2009 by Yong Yin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.