nep-for New Economics Papers
on Forecasting
Issue of 2006‒01‒29
three papers chosen by
Rob J Hyndman
Monash University

  1. Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty and Risk By Gürkaynak, Refet.S.; Wolfers, Justin
  2. Monetary Policy and the Evolution of the US Economy By Canova, Fabio; Gambetti, Luca
  3. Forecasting investment needs in South Africa ' s electricity and telecommunications sectors By Fedderke, Johannes W.; Bogetic, Zeljko

  1. By: Gürkaynak, Refet.S.; Wolfers, Justin
    Abstract: September 2002, a new market in 'Economic Derivatives' was launched allowing traders to take positions on future values of several macroeconomic data releases. We provide an initial analysis of the prices of these options. We find that market-based measures of expectations are similar to survey-based forecasts although the market-based measures somewhat more accurately predict financial market responses to surprises in data. These markets also provide implied probabilities of the full range of specific outcomes, allowing us to measure uncertainty, assess its driving forces, and compare this measure of uncertainty with the dispersion of point-estimates among individual forecasters (a measure of disagreement). We also assess the accuracy of market-generated probability density forecasts. A consistent theme is that few of the behavioural anomalies present in surveys of professional forecasts survive in equilibrium, and that these markets are remarkably well calibrated. Finally we assess the role of risk, finding little evidence that risk-aversion drives a wedge between market prices and probabilities in this market.
    Keywords: density forecasts; disagreement; economic derivatives; expectations; forecasting; macroeconomic surveys; prediction markets; surveys; uncertainty
    JEL: C5 C82 D8 E3 G14
    Date: 2006–01
  2. By: Canova, Fabio; Gambetti, Luca
    Abstract: This paper investigates the relationship between monetary policy and the changes experienced by the US economy using a small scale New Keynesian model. The model is estimated with Bayesian techniques and the stability of policy parameter estimates and of the transmission of policy shocks examined. The model fits well the data and produces forecasts comparable or superior to those of alternative specifications. The parameters of the policy rule, the variance and the transmission of policy shocks have been remarkably stable. The parameters of the Phillips curve and of the Euler equations are varying.
    Keywords: Bayesian methods; great inflation; monetary policy; New Keynesian model
    JEL: C53 E47 E52
    Date: 2006–01
  3. By: Fedderke, Johannes W.; Bogetic, Zeljko
    Abstract: The authors use a panel-data set for the period 1980-2002 to estimate demand for electricity and telecommunications services and project investment needs in South Africa through 2010 for two growth scenarios. Projections of average annual investment needs in electricity and telecommunications for the current growth scenario (3.6 percent a year) are of the order of 0.2 percent and 0.75 percent of GDP, respectively. An alternative, accelerated growth scenario (6 percent a year) implies approximate doubling of investment needs in these sectors.
    Keywords: Economic Theory & Research,Investment and Investment Climate,Banks & Banking Reform,Pro-Poor Growth and Inequality,ICT Policy and Strategies
    Date: 2006–02–01

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