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on Forecasting |
| By: | Charlotte Christiansen (Aarhus University and CREATES); Jonas Nygaard Eriksen (Aarhus University and CREATES); Stig V. Møller (Aarhus University and CREATES) |
| Abstract: | We examine sentiment variables as new predictors for US recessions. We combine sentiment variables with either classical recession predictors or with common factors based on a large panel of macroeconomic and ?nancial variables. Sentiment variables hold vast predictive power for US recessions in excess of both the classical recession predictors and the common factors. The strong importance of the sentiment variables is documented both in-sample and out-of-sample. |
| Keywords: | Business cycles; Forecasting; Factor analysis; Probit model; Sentiment variables |
| JEL: | C22 C25 E32 E37 G17 |
| Date: | 2013–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:aah:create:2013-14&r=for |
| By: | Inna Cintina (UHERO, University of Hawaii at Manoa) |
| Abstract: | We analyze the forecasting performance of small mixed frequency factor models when the observed variables share stochastic trends. The indicators are observed at various frequencies and are tied together by cointegration so that valuable high frequency information is passed to low frequency series through the common factors. Differencing the data breaks the cointegrating link among the series and some of the signal leaks out to the idiosyncratic components, which do not contribute to the transfer of information among indicators. We find that allowing for common trends improves forecasting performance over a stationary factor model based on differenced data. The common-trends factor model" outperforms the stationary factor model at all analyzed forecast horizons. Our results demonstrate that when mixed frequency variables are cointegrated, modeling common stochastic trends improves forecasts. |
| Keywords: | Emergency contraception; Plan B; Abortion; Pregnancy; Border-hopping; Travel distance |
| JEL: | I1 I18 J13 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:hae:wpaper:2013-6&r=for |
| By: | Gabriel Pino; Juan de Dios Tena; Antoni Espasa |
| Abstract: | We study the performance of different modelling strategies for 969 and 600 monthly price indexes disaggregated by sectors and geographical areas in Spain, regions, and in the EA12, countries, in order to obtain a detailed picture of inflation and relative sectoral prices through geographical areas for each economy, using the forecasts from those models. The study also provides a description of the spatial cointegration restrictions which could be useful for understanding price setting within an economy. We use spatial bi-dimensional vector equilibrium correction models, where the price indexes for each sector are allowed to be cointegrated with prices in neighbouring areas using different definitions of neighbourhood. We find that geographical disaggregation forecasts are very reliable on a regional level in Spain as they improve the forecasting accuracy of headline inflation relative to alternative methods. Geographical disaggregation forecasts are also reliable for the EA12 but only because derived headline inflation forecasting is not significantly worse than alternative forecasts. These results show that regional analysis within countries is appropriate in the euro area. These highly disaggregated forecasts can be used for competitive and other type of macro and regional analysis |
| Keywords: | Spatial cointegration, Regional and sectoral prices, Regional analysis, Relative prices, Price setting, Competitiveness |
| JEL: | C2 C5 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:cte:wsrepe:ws130807&r=for |
| By: | Gustavo A. Sánchez (StataCorp) |
| Abstract: | In this presentation, I discuss two applications of the vec commands. First, I use the cointegrating VAR approach discussed in Garratt et al. (2006) to fit a vector error-correction model. In contrast with the application of the traditional Johansen statistical restrictions for the identification of the coefficients of the cointegrating vectors, I use Stata to show an alternative specification of those restrictions based on the theoretical framework for the long-run cointegrating relationships. Second, I apply probability forecasting to simulate probability distributions for the forecasted periods. This approach produces probabilities for future single and joint events instead of only producing point forecasts and confidence intervals. For example, we could estimate the joint probability of two-digit inflation combined with a decrease in the GDP. |
| Date: | 2013–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:boc:msug13:11&r=for |
| By: | Paul Hubert (Ofce sciences-po) |
| Abstract: | Policymakers at the Federal Open Market Committee (FOMC) publish forecasts since 1979. We examine the effects of publishing FOMC inflation forecasts in two steps using a structural VAR model. We assess whether they influence private inflation expectations and the underlying mechanism at work: do they convey policy signals for forward guidance or help interpreting current policy decisions? We provide original evidence that FOMC inflation forecasts are able to influence private ones. We also find that FOMC forecasts give information about future Fed rate movements and affect private expectations in a different way than Fed rate shocks. This body of evidence supports the use of central bank forecasts to affect inflation expectations especially while conventional policy instruments are at the zero lower bound |
| Keywords: | Monetary policy, Forecasts, FOMC, influence, Policy signals, structural Var |
| JEL: | E52 E58 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:1303&r=for |
| By: | Paul Hubert (Ofce sciences-po) |
| Abstract: | The European Central Bank publishes inflation projections quarterly. This paper aims at establishing whether they influence private forecasts and whether they may be considered as an enhanced means of implementing policy decisions by facilitating private agents’ information processing. We provide original evidence that ECB inflation projections do influence private inflation expectations. We also find that ECB projections give information about future ECB rate movements, and that the ECB rate has different effects if complemented or not with the publication of ECB projections. We conclude that ECB projections enable private agents to correctly interpret and predict policy decisions. |
| Keywords: | Monetary policy, ECB, Private forecasts, Influence, Structural Var |
| JEL: | E52 E58 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:1304&r=for |
| By: | Nicholas Apergis; Arusha Cooray |
| Abstract: | The goal of the present paper is to investigate not only the dynamics of the Greek public debt, but also the appropriate measures required for achieving fiscal consolidation. The empirical estimation is carried out using a macroeconomic dataset spanning the period 1980-2008 and both the 3SLS methodological approach on a theoretical model and the structural VAR methodology to perform forecast tests and to calibrate the future paths of the public debt variable up to 2020. The results suggest that only an aggressive growth policy could permit the country to achieve debt sustainability. The results are expected to have important implications to policy makers for designing effective macroeconomic policy in terms of achieving sustainable levels of public debt. |
| Keywords: | primary balance, public debt, structural modeling, Greece |
| JEL: | E62 C51 C30 E27 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2013-25&r=for |
| By: | Ian Christensen; Fuchun Li |
| Abstract: | The authors use the Financial Stress Index created by the International Monetary Fund to predict the likelihood of financial stress events for five developed countries: Canada, France, Germany, the United Kingdom and the United States. They use a semiparametric panel data model with nonparametric specification of the link functions and linear index function. The empirical results show that the semiparametric early warning model captures some well-known financial stress events. For Canada, Germany, the United Kingdom and the United States, the semiparametric model can provide much better out-of-sample predicted probabilities than the logit model for the time period from 2007Q2 to 2010Q2, while for France, the logit model provides better performance for non-financial stress events than the semiparametric model. |
| Keywords: | Econometric and statistical methods; Financial stability |
| JEL: | G01 G17 C12 C14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:13-13&r=for |
| By: | Yanyun Zhao; Concepción Ausín; Michael P. Wiper |
| Abstract: | This paper introduces a new approach to Bayesian nonparametric inference for densities on the hypercube, based on the use of a multivariate Bernstein polynomial prior. Posterior convergence rates under the proposed prior are obtained. Furthermore, a novel sampling scheme, based on the use of slice sampling techniques, is proposed for estimation of the posterior predictive density. The approach is illustrated with both simulated and real data examples |
| Keywords: | Bayesian nonparametrics, Bernstein polynomials, Dirichlet process |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:cte:wsrepe:ws131211&r=for |
| By: | Menzie D. Chinn; Laurent Ferrara; Valérie Mignon |
| Abstract: | This paper aims at investigating the relationship between employment and GDP in the United States. We disentangle trend and cyclical employment components by estimating a non-linear Okun’s law based on a smooth transition error-correction model that simultaneously accounts for long-term relationships between growth and employment and short-run instability over the business cycle. Our findings based on out-of-sample conditional forecasts show that, since the exit of the 2008-09 recession, US employment is on average around 1% below the level implied by the long run output-employment relationship, meaning that about 1.2 million of the trend employment loss cannot be attributed to the identified cyclical factors. |
| JEL: | C22 E24 E32 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19047&r=for |
| By: | Ippei Fujiwara; Lena Mareen Korber; Daisuke Nagakura |
| Abstract: | Is there asymmetry in the distribution of government bond returns in developed countries? Can asymmetries be predicted using financial and macroeconomic variables? To answer the first question, we provide evidence for asymmetry in government bond returns in particular for short maturities. This finding has important implications for modelling and forecasting government bond returns. For example, widely used models for yield curve analysis such as the affine term structure model assume symmetrically distributed innovations. To answer the second question, we find that liquidity in government bond markets predicts the coefficient of skewness with a positive sign, meaning that the probability of a large and negative excess return is more likely in a less liquid market. In addition, a positive realized return is associated with a negative coefficient of skewness, or a small probability of a large and negative return in the future. |
| Keywords: | Government Bond Returns; Skewness; Conditional Symmetry Test |
| JEL: | G10 G12 E43 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2013-12&r=for |
| By: | Miguel Angel Ramirez (UNAM) |
| Abstract: | From its beginnings in the second half of the nineteenth century until today, the study of economic time series has involved a variety of research anchored in stylized mathematical methods in order to simulate, verify, test, and forecast the behavior of key economic variables to describe economic activity and its phenomena intertemporally. Despite the proliferation of studies, it was not until the 1980s that the procedure outlined by Robert James Hodrick and Edward Christian Prescott acquired special relevance. Their method, isolating the effects and trend-cycle series, denoted a turning point in modern econometric modeling. However, the spread of the "HP filter" in economic applications used by researchers, academics, students, and policy-makers has led to implausible results because of inadequate specifications in the decomposition of the series. In this context, this analysis attempts to overcome the methodological problems inherent in the filter, indicate a brief theoretical outline of the time series, formulate a sui generis consistent parameter of variables, and show in Stata a simulation of the real exchange rate in Norway. |
| Date: | 2013–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:boc:msug13:07&r=for |
| By: | Alfonso Mendoza Velázquez; Peter N. Smith |
| Abstract: | The equity premium in the UK appears to have risen significantly since the start of the financial crisis and the associated extended recession. This paper examines the relationship between the business cycle and equity market returns to see how robust this association is. Several classifications of UK business cycle quarters are examined and related to the returns from an investment strategy which buys the market one or more quarters after a business cycle quarter and holds it for one year. Official business cycle dating methods as well as identified structural macroeconomic shocks are examined. The findings are that there is clear evidence for counter-cyclicality in excess returns. Returns are significantly higher in the year following a recession rather than an expansion quarter. There is also a significant difference in the pattern of returns if the downturn in the quarter is the result of a supply or demand shock. Negative supply shocks are found to have an especially large and significant counter cyclical impact on returns. This paper analyses a long period of UK data for determining realised returns using revised data as well as expected returns using a shorter dataset of real-time data. The paper finds similar results for the two datasets suggesting that realsied and expected returns may not be so different from one another. The paper also assesses the ability of the models to forecast outside of their sample period. |
| Keywords: | Equity Returns, Equity Premium, Business Cycle |
| JEL: | G12 C32 C51 E44 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2013-22&r=for |
| By: | Paixão, Paulo; Buratini, Ricardo; Guilhoto, Joaquim José Martins |
| Abstract: | This paper relates an ongoing experience of developing and transferring the knowledge required to understand and operate a regionally disaggregated supply and use input-output model. This R&D project is financed by ANEEL, the Brazilian regulatory agency for electricity generation and distribution, and it is conducted in partnership between an electricity utility company, CPFL, and the Department of Economics at the University of São Paulo (FEA/USP) in Brazil. A brief account of the model theoretical structure is provided, from which three major improvements are expected: a) a better impact assessment of structural economic changes on the consumption of electricity; b) analyses tailored to the specific regional boundaries of the CPFL area of operation; and c) the identification of direct and indirect changes on electricity consumption accruing from regional development. In order to establish an in-company team capable of applying the model in response to their day to day managerial demands, a training program was devised in order to make them as familiar as possible with the necessary input-output theoretical background, and also skillful enough so as to efficiently apply the model. The paper relates the challenges that have been found in doing so, which means not only transferring academic knowledge to an audience not familiarized to input-output economics within a time schedule severely constrained by the pressure of daily work, but also to match this knowledge to the company technical interests. |
| Keywords: | input-output; energy |
| JEL: | Q40 R15 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:47008&r=for |