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on Forecasting |
| By: | Menzie D. Chinn; Ron Alquist |
| Abstract: | We examine the relative predictive power of the sticky price monetary model, uncovered interest parity, and a transformation of net exports and net foreign assets. In addition to bringing Gourinchas and Rey’s new approach and more recent data to bear, we implement the Clark and West (forthcoming) procedure for testing the significance of out-of-sample forecasts. The interest rate parity relation holds better at long horizons and the net exports variable does well in predicting exchange rates at short horizons in-sample. In out-of-sample forecasts, we find evidence that our proxy for Gourinchas and Rey’s measure of external imbalances outperforms a random walk at short horizons as do some of other models, although no single model uniformly outperforms the random walk forecast. |
| JEL: | F31 F47 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12481&r=for |
| By: | Angela Maddaloni (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Alberto Musso (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Philipp Rother (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Melanie Ward-Warmedinger (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Thomas Westermann (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper examines the macroeconomic consequences of future demographic trends for economic growth, financial markets and public finances. It shows that in the absence of reforms and responses by economic agents, the currently projected demographic trends imply a decline in average real GDP growth and a severe burden in terms of pay-as-you-go pension and health care systems. Population ageing will change the financial landscape, with a potentially larger role for financial intermediaries and asset prices. All this points to a need to closely monitor demographic change also from a monetary policy perspective. While population projections are surrounded by considerable uncertainty and the effects of demographic change tend to be drawn out, the magnitude of the potential effects calls for an early recognition of this issue. This paper provides some input to the examination of possible policy issues. |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20060051&r=for |