H andbook of economic forecasting elliott graham timmermann allan
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Volumes 2A and 2B, which follows Nobel laureate Clive Granger's Volume 1 2006 , concentrate on two major subjects. This implies that the residual variance in the regression does not 9 An exception is the case of an asymmetric loss function that might sometimes be more appropriate for forecasts for fiscal and monetary policy purposes see e. We also review identification issues, how to test part of a model and whether alternative evaluation methods such as forecasting or likelihood ratio tests are potentially helpful. We review forecasting models and provide practical applications. State-of-the-art methods for solving and estimating such models are reviewed and presented in examples. Meyler , International Journal of Forecasting 2013, 29, 108-121. The chapter concludes with a discussion of important objectives for ongoing and future research using the New Keynesian framework.

We find that accounting for financial market imperfections does not result in a uniform improvement in the accuracy of point forecasts during non-crisis times, while the average quality of density forecast actually deteriorates. Ć Volume 2BĆ investigates commercial applications,Ć with sections on forecasters' objectives and methodologies. Guidolin , Review of Financial Studies, 2008, 21, 889-935. Now-Casting and the Real-Time Data Flow Abstract 1 Introduction 2 Now-Casting: Problem and Overview of Approaches 3 Empirical Application 4 Conclusions and Discussion on Further Developments Acknowledgments Appendix A Appendix: Details on the State Space Representation and Estimation References Chapter 5. Our main focus will be on the way we conduct conditional forecasting, i. First, a theoretical framework is presented to differentiate the role of forecasts in simple feedback rules, optimal control policies, and forecast targeting. It starts by reviewing the origins of the New Keynesian approach, the key model ingredients and representative models.

In particular, we provide evidence on the properties of forecasts for three key macroeconomic variables: the inflation rate, the growth rate of real gross domestic product and the unemployment rate. We therefore argue that forecasting ability during the Great Moderation is not a good metric by which to judge models. Policymakers use forecasts to project the consequences of particular policy decisions for certain policy targets. The model is derived from optimizing behavior under rational expectations, both on the part of the purchasers of goods who choose quantities to purchase given the expected path of real interest rates , and upon that of the sellers of goods who set prices on the basis of the expected evolution of demand. It was introduced in New Zealand in 1990, has been very successful in terms of stabilizing both inflation and the real economy, and as of 2010 has been adopted by about 25 industrialized and emerging-market economies. Volume 2A covers innovations in methodologies, specifically macroforecasting and forecasting financial variables. Among existing approaches, we find that innovations to the federal funds rate Bernanke-Blinder are a good measure of policy innovations during the periods 1965-79 and 1988-94; for the period 1979-94 as a whole, innovations to the component of nonborrowed reserves that is orthogonal to total reserves Strongin seems to be the best choice.

Ang , Annual Review of Financial Economics 2012, 4:313-337. Guidolin , Economic Journal, 2005, 111-143. Forthcoming in Forecast Handbook Oxford , Edited by Michael Clements and David Hendry. Inflation targeting is shown to imply inflation forecast targeting: the central bank's inflation forecast becomes an explicit intermediate target. Wermers , Journal of Financial Economics 2013, 108, 699-726. Volumes 2A and 2B, which follows Nobel laureate Clive Granger's Volume 1 2006 , concentrate on two major subjects.

In recent years the availability of more data, analytical tools of greater precision, and ex post studies of business decisions have increased demand for information about economic forecasting. There are many new models that deliver improved estimates of the transmission of macroeconomic policies and aim to better integrate the financial sector in business cycle analysis. Economic Forecasting presents a comprehensive, unified approach to assessing the costs and benefits of different methods currently available to forecasters. We also show that forecasters adjust their forecasts slowly around business cycle turning points. Forecasting Binary Outcomes Abstract 1 Introduction 2 Probability Predictions 3 Evaluation of Binary Event Predictions 4 Binary Point Predictions 5 Improving Binary Predictions 6 Conclusion Acknowledgments References Chapter 20. Forecasting Stock Returns Abstract 1 Introduction 2 What Level of Predictability Should We Expect? Volume 2B investigates commercial applications, with sections on forecasters' objectives and methodologies. We examine both the degree and the structural stability of inflation persistence at different quantiles of the conditional inflation distribution.

Dedication Introduction to the Series Contributors Section I: Macro Forecasting Chapter 1. Track citations for all items by Is something missing from the series or not right? Beliefs about the inflation persistence explain the observed decline in the mean and the volatility of inflation as well as Phillips curve flattening. We present empirical results from several recent papers that offer three explanations of interest-rate smoothing: forward-looking behavior by market participants, measurement error associated with key macroeconomic variables, and uncertainty regarding relevant structural parameters. In the face of uncertainty, the evidence supports that in making forecasts of trends and output gap policy-makers should focus on allowing for the correlation of shocks as an order of priority higher than unknown structural breaks. This paper considers a simple quantitative model of output, interest rate and inflation determination in the United States, and uses it to evaluate alternative rules by which the Fed may set interest rates. This paper uses a multi-region dynamic general equilibrium model with collateral constrained households and residential investment to examine the effectiveness of fiscal policy.

Rossi , Review of Financial Studies 2015, vol. Research with Keynesian-style models has emphasized the importance of the output gap for policies aimed at controlling inflation while declaring monetary aggregates largely irrelevant. We explore methods of generating forecasts in the presence of a zero-lower-bound constraint on nominal interest rates and conditional on counterfactual interest rate paths. Model parameters are estimated and forecasts are derived successively from historical U. We use structural macroeconomic models to estimate this impact. Volumes 2A and 2B, which follows Nobel laureate Clive Granger's Volume 1 2006 , concentrate on two major subjects. Ć Volume 2AĆ covers innovations in methodologies, specifically macroforecasting and forecasting financial variables.

Reinhard Hansen , Econometrica 2015, 83 6 2485-2505. We estimate a forward-looking monetary policy reaction function for the postwar United States economy, before and after Volcker's appointment as Fed Chairman in 1979. Dedication Introduction to the Series Contributors Section I: Macro Forecasting Chapter 1. It thus argues that rule-based policymaking need not mean adherence to a rigid framework unrelated to stabilization objectives for the sake of credibility, while at the same time showing the advantages of rule-based over purely discretionary policymaking. Pick , Jourrnal of Econometrics 2011, 164, 173-187. In recent years the availability of more data, analytical tools of greater precision, and ex post studies of business decisions have increased demand for information about economic forecasting.