Factor Model Forecasts of Inflation in Croatia
|
|
- Elizabeth Nash
- 5 years ago
- Views:
Transcription
1 Factor Model Forecasts of Inflation in Croatia Davor Kunovac Croatian National Bank Econometric Modelling Department
2 Contents 1. Motivation & Objective 2. Forecasting model: de nition and estimation 3. Forecast evaluation 4. Principal component as a summary statistics
3 Motivation 1. Many evidences that there exist few unobservable variables - common factors, governing the whole economy. How to construct or identify these driving forces? (Stock and Watson, JBES, 2002) 2. Most empirical analysis of monetary policy wrongly pressume that central bankers decisions are grounded on only few key macro variables while in practice the thousands of variables are being monitored. How to formalise this? (Bernanke and Boivin, JME, 2003) 3. Transition economies are dealing with data having quite short time spans (less than 10 years of reliable in ation data for Croatia). So, any sort of data compression methods - welcomed!
4 Objective I This analysis tests whether information extracted from 144 economic variables can help in forecasting CPI in ation in Croatia
5 Forecasting Model Model (James Stock & Mark Watson, JBES, 2002) I Assume that for given observations of N = 144 variables X 1 ; : : : ; X N there exist r ( N; hopefully just 2 or 3) factors F 1 ; : : : ; F r such that: X it = i1 F 1t +: : :+ ir F rt +" it ; i = 1; : : : ; N; t = 1; : : : ; T I Forecasting model (h - steps - ahead forecast): X = F + " y t+h = h + 0 F t + : : : + p F t p + 0 y t + : : : + q y t q + t+h I (Too) many unknows: ; F and noise variances, so in order to estimate the system some restrictions need to be imposed!
6 Forecasting Model Estimation Assume = I r and minimise the sum of squares: V (F; ) = NX i=1 TX " 2 it = jjx ^F jj 2 F ; (1) t=1 Applying (multiple multivariate version) least squares we estimate factors: ^F = ( ) 1 X = ( = I r ) = X ; (2) By plugging (2) into (1) we have: V ( ^F ; ) = jjx ^F jj 2 F (3) = jjxjj 2 F tr( X X): (4)
7 Forecasting Model Estimation I Solve the problem: max tr( X X), = I r I Setting ^ equal to k eigenvectors of X X corresponding to k largest eigenvalues yields the principal components estimator ^F = X ^
8 Results I Factor model X = F + " y t+h = h + 0 F t + : : : + p F t p + 0 y t + : : : + q y t q + t+h challenged against non-trivial AR benchmark in in ation forecasting exercise I forecasts evaluated using MSE relative to benchmark (Relative MSE<1 ) factor model beats benchmark): Horizon Relative MSE
9 Results R 2 statistics between rst two factors and 144 variables of Croatian economy R 2 Prices, Ex. rates External Money Real Labour R Prices, Ex. rates External Money Real Labour
10 Results R 2 statistics between tenth and eleventh factor and 144 variables of Croatian economy R 2 Prices, Ex. rates External Money Real Labour R Prices, Ex. rates External Money Real Labour
11 Principal Component as a summary statistics I Recent analysis by CNB deals with the impact of USD/EUR rate on CEECs in ation rates I E ect seems to be quite strong, especially in countries xing their ER to EUR (Croatia, Bulgaria, Estonia) I Fixers in ation rates principal component highly correlated to USD/EUR ER I Common force driving CEECs in ation rates?
12 Principal Component as a summary statistics Fixers in ations principal component and EUR/USD exchange rate 3 2 Principal Component EUR/USD (YoY growth rates)
13 References Bai, J., and S. Ng (2002), Determining the number of factors in approximate factor models, Econometrica 70, pp Bernanke, B. and J. Boivin (2003), Monetary Policy in a Data-Rich Environment, Journal of Monetary Economics, 50, Stock, J. F. and M. W. Watson (2002), Macroeconomic Forecasting Using Di usion Indexes. Journal of Business and Economic Statistics 20:
Measuring Bank Insolvency Risk in CEEC
Measuring Bank Insolvency Risk in CEEC Lana IviµCiĆ Davor Kunovac Igor Ljubaj Croatian National Bank Outline 1. Motivation 2. Empirics 2.1 Bank insolvency risk decomposition (regression analysis) 2.2 Conditional
More informationFactor Models of Asset Returns
Factor Models of Asset Returns Gregory Connor y and Robert Korajczyk z May 27, 2009 Abstract Factor models of security returns decompose the random return on each of a cross-section of assets into pervasive
More informationCan 123 Variables Say Something About Inflation in Malaysia?
Can 123 Variables Say Something About Inflation in Malaysia? Kue-Peng Chuah 1 Zul-fadzli Abu Bakar Preliminary work - please do no quote First version: January 2015 Current version: April 2017 TIAC - BNM
More informationCommodity Prices, Commodity Currencies, and Global Economic Developments
Commodity Prices, Commodity Currencies, and Global Economic Developments Jan J. J. Groen Paolo A. Pesenti Federal Reserve Bank of New York August 16-17, 2012 FGV-Vale Conference The Economics and Econometrics
More informationDiscussion of Trend Inflation in Advanced Economies
Discussion of Trend Inflation in Advanced Economies James Morley University of New South Wales 1. Introduction Garnier, Mertens, and Nelson (this issue, GMN hereafter) conduct model-based trend/cycle decomposition
More information1. Operating procedures and choice of monetary policy instrument. 2. Intermediate targets in policymaking. Literature: Walsh (Chapter 9, pp.
Monetary Economics: Macro Aspects, 14/4 2010 Henrik Jensen Department of Economics University of Copenhagen 1. Operating procedures and choice of monetary policy instrument 2. Intermediate targets in policymaking
More informationCan Demographics improve the forecast accuracy of inflation? Evidence from United Kingdom.
Abstract Can Demographics improve the forecast accuracy of inflation? Evidence from United Kingdom. Master s Thesis Submitted to the Department of Economics, Lund University. Author: Dodou Saidy Supervisor:
More informationCombining State-Dependent Forecasts of Equity Risk Premium
Combining State-Dependent Forecasts of Equity Risk Premium Daniel de Almeida, Ana-Maria Fuertes and Luiz Koodi Hotta Universidad Carlos III de Madrid September 15, 216 Almeida, Fuertes and Hotta (UC3M)
More informationThe Fourteenth Dubrovnik Economic Conference
The Fourteenth Dubrovnik Economic Conference Organized by the Croatian National Bank Lana Ivičić, Davor Kunovac and Igor Ljubaj Measuring Bank Insolvency Risk in CEE Countries Hotel "Grand Villa Argentina",
More informationThe Role of Physical Capital
San Francisco State University ECO 560 The Role of Physical Capital Michael Bar As we mentioned in the introduction, the most important macroeconomic observation in the world is the huge di erences in
More informationAsian Economic and Financial Review EMPIRICAL TESTING OF EXCHANGE RATE AND INTEREST RATE TRANSMISSION CHANNELS IN CHINA
Asian Economic and Financial Review, 15, 5(1): 15-15 Asian Economic and Financial Review ISSN(e): -737/ISSN(p): 35-17 journal homepage: http://www.aessweb.com/journals/5 EMPIRICAL TESTING OF EXCHANGE RATE
More informationCountry Spreads as Credit Constraints in Emerging Economy Business Cycles
Conférence organisée par la Chaire des Amériques et le Centre d Economie de la Sorbonne, Université Paris I Country Spreads as Credit Constraints in Emerging Economy Business Cycles Sarquis J. B. Sarquis
More informationNBER WORKING PAPER SERIES MACRO FACTORS IN BOND RISK PREMIA. Sydney C. Ludvigson Serena Ng. Working Paper
NBER WORKING PAPER SERIES MACRO FACTORS IN BOND RISK PREMIA Sydney C. Ludvigson Serena Ng Working Paper 11703 http://www.nber.org/papers/w11703 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue
More informationBanca d Italia. Ministero dell Economia e delle Finanze. November Real time forecasts of in ation: the role of.
Banca d Italia Ministero dell Economia e delle Finanze November 2008 We present a mixed to forecast in ation in real time It can be easily estimated on a daily basis using all the information available
More informationData Revisions and Macroecomics DR. ANA BEATRIZ GALVAO WARWICK BUSINESS SCHOOL UNIVERSITY OF WARWICK SEP, 2016
Data Revisions and Macroecomics DR. ANA BEATRIZ GALVAO WARWICK BUSINESS SCHOOL UNIVERSITY OF WARWICK SEP, 2016 National Account Data Macroeconomic aggregates: consumption, investment, GDP, trade balance.
More informationLabor Hoarding and Inventories
WORKING PAPER SERIES Labor Hoarding and Inventories Yi Wen Working Paper 2005-040B http://research.stlouisfed.org/wp/2005/2005-040.pdf June 2005 Revised October 2005 FEDERAL RESERVE BANK OF ST. LOUIS Research
More informationECON 5010 Solutions to Problem Set #3
ECON 5010 Solutions to Problem Set #3 Empirical Macroeconomics. Go to the Federal Reserve Economic Database (FRED) and download data on the prime bank loan rate (r t ) and total establishment nonfarm employees
More informationBirkbeck MSc/Phd Economics. Advanced Macroeconomics, Spring Lecture 2: The Consumption CAPM and the Equity Premium Puzzle
Birkbeck MSc/Phd Economics Advanced Macroeconomics, Spring 2006 Lecture 2: The Consumption CAPM and the Equity Premium Puzzle 1 Overview This lecture derives the consumption-based capital asset pricing
More informationDo core inflation measures help forecast inflation? Out-of-sample evidence from French data
Economics Letters 69 (2000) 261 266 www.elsevier.com/ locate/ econbase Do core inflation measures help forecast inflation? Out-of-sample evidence from French data Herve Le Bihan *, Franck Sedillot Banque
More informationOesterreichische Nationalbank. Eurosystem. Workshops. Proceedings of OeNB Workshops. Macroeconomic Models and Forecasts for Austria
Oesterreichische Nationalbank Eurosystem Workshops Proceedings of OeNB Workshops Macroeconomic Models and Forecasts for Austria November 11 to 12, 2004 No. 5 Comment on Evaluating Euro Exchange Rate Predictions
More informationOpen Economy I: Concepts
Open Economy I: Concepts 1. Exchange Rates 2. Full Employment Output 3. Interest Rates 1 Exchange Rates Nominal exchange rate E t Cost of domestic currency in terms of foreign currency Foreign-currency
More informationTerm Structure Forecasting: No-arbitrage Restrictions vs. Large Information set
Term Structure Forecasting: No-arbitrage Restrictions vs. Large Information set Carlo A. Favero Linlin Niu Luca Sala IGIER, Bocconi University This version: March 27 Abstract This paper addresses the issue
More informationScapegoat Theory of Exchange Rates. First Tests
The : The First Tests Marcel Fratzscher* Lucio Sarno** Gabriele Zinna *** * European Central Bank and CEPR ** Cass Business School and CEPR *** Bank of England December 2010 Motivation Introduction Motivation
More informationChapter 0: Introduction to macroeconomics
Chapter 0: Introduction to macroeconomics References: Burda & Wyplosz: Macroeconomics 4e, Oxford University Press, Blanchard; Macroeconomics, Prentice Hall. Macroeconomics: a branch of economics that deals
More informationReserve Bank of New Zealand Analytical Notes
Reserve Bank of New Zealand Analytical Notes Developing a labour utilisation composite index for New Zealand AN6/4 Jed Armstrong, Güneş Kamber, and Özer Karagedikli April 6 Reserve Bank of New Zealand
More informationTHE EFFECTS OF THE EU BUDGET ON ECONOMIC CONVERGENCE
THE EFFECTS OF THE EU BUDGET ON ECONOMIC CONVERGENCE Eva Výrostová Abstract The paper estimates the impact of the EU budget on the economic convergence process of EU member states. Although the primary
More informationFaster solutions for Black zero lower bound term structure models
Crawford School of Public Policy CAMA Centre for Applied Macroeconomic Analysis Faster solutions for Black zero lower bound term structure models CAMA Working Paper 66/2013 September 2013 Leo Krippner
More informationFinancial Ampli cation of Foreign Exchange Risk Premia 1
Financial Ampli cation of Foreign Exchange Risk Premia 1 Tobias Adrian, Erkko Etula, Jan Groen Federal Reserve Bank of New York Brussels, July 23-24, 2010 Conference on Advances in International Macroeconomics
More informationTesting the Stickiness of Macroeconomic Indicators and Disaggregated Prices in Japan: A FAVAR Approach
International Journal of Economics and Finance; Vol. 6, No. 7; 24 ISSN 96-97X E-ISSN 96-9728 Published by Canadian Center of Science and Education Testing the Stickiness of Macroeconomic Indicators and
More informationMACRO-AUGMENTED VOLATILITY FORECASTING
MACRO-AUGMENTED VOLATILITY FORECASTING Zach Nye, Stanford Consulting Group, 702 Marshall Street, Suite 200, Redwood City, CA 94063-1829, 650-298-0200 ext. 225, zach@scginc.com Mark Washburn, College of
More informationOptimal Window Selection for Forecasting in The Presence of Recent Structural Breaks
Optimal Window Selection for Forecasting in The Presence of Recent Structural Breaks Yongli Wang University of Leicester Econometric Research in Finance Workshop on 15 September 2017 SGH Warsaw School
More informationAppendix: Model and Experiments
Appendix: Model and Experiments 1. Model A. Model solution under rational expectations Denoting π e t = E t π t+1, x e t = E t x t+1, we can write the rational expectations solution of the equilibrium
More informationJournal of Economics and Financial Analysis, Vol:1, No:1 (2017) 1-13
Journal of Economics and Financial Analysis, Vol:1, No:1 (2017) 1-13 Journal of Economics and Financial Analysis Type: Double Blind Peer Reviewed Scientific Journal Printed ISSN: 2521-6627 Online ISSN:
More informationInvestment is one of the most important and volatile components of macroeconomic activity. In the short-run, the relationship between uncertainty and
Investment is one of the most important and volatile components of macroeconomic activity. In the short-run, the relationship between uncertainty and investment is central to understanding the business
More informationAsset Prices and Institutional Investors: Discussion
Asset Prices and nstitutional nvestors: Discussion Suleyman Basak and Anna Pavlova Ralph S.J. Koijen University of Chicago and NBER June 2011 Koijen (U. of Chicago and NBER) Asset Prices and nstitutional
More informationWhat Drives the International Bond Risk Premia?
What Drives the International Bond Risk Premia? Guofu Zhou Washington University in St. Louis Xiaoneng Zhu 1 Central University of Finance and Economics First Draft: December 15, 2013; Current Version:
More informationA measure of supercore inflation for the eurozone
Inflation A measure of supercore inflation for the eurozone Global Macroeconomic Scenarios Introduction Core inflation measures are developed to clean headline inflation from those price items that are
More informationFinancial Econometrics Series SWP 2011/13. Did the US Macroeconomic Conditions Affect Asian Stock Markets? S. Narayan and P.K.
Faculty of Business and Law School of Accounting, Economics and Finance Financial Econometrics Series SWP 2011/13 Did the US Macroeconomic Conditions Affect Asian Stock Markets? S. Narayan and P.K. Narayan
More informationAppendix for The Long-Run Risks Model and Aggregate Asset Prices: An Empirical Assessment
Appendix for The Long-Run Risks Model and Aggregate Asset Prices: An Empirical Assessment Jason Beeler and John Y. Campbell October 0 Beeler: Department of Economics, Littauer Center, Harvard University,
More informationForecasting Singapore economic growth with mixed-frequency data
Edith Cowan University Research Online ECU Publications 2013 2013 Forecasting Singapore economic growth with mixed-frequency data A. Tsui C.Y. Xu Zhaoyong Zhang Edith Cowan University, zhaoyong.zhang@ecu.edu.au
More informationUniversity of Pretoria Department of Economics Working Paper Series
University of Pretoria Department of Economics Working Paper Series On Economic Uncertainty, Stock Market Predictability and Nonlinear Spillover Effects Stelios Bekiros IPAG Business School, European University
More informationProblem Set 1: Review of Mathematics; Aspects of the Business Cycle
Problem Set 1: Review of Mathematics; Aspects of the Business Cycle Questions 1 to 5 are intended to help you remember and practice some of the mathematical concepts you may have encountered previously.
More informationReal Time Macro Factors in Bond Risk Premium
Real Time Macro Factors in Bond Risk Premium Dashan Huang Singapore Management University Fuwei Jiang Central University of Finance and Economics Guoshi Tong Renmin University of China September 20, 2018
More informationState Switching in US Equity Index Returns based on SETAR Model with Kalman Filter Tracking
State Switching in US Equity Index Returns based on SETAR Model with Kalman Filter Tracking Timothy Little, Xiao-Ping Zhang Dept. of Electrical and Computer Engineering Ryerson University 350 Victoria
More informationMonetary credibility problems. 1. In ation and discretionary monetary policy. 2. Reputational solution to credibility problems
Monetary Economics: Macro Aspects, 2/4 2013 Henrik Jensen Department of Economics University of Copenhagen Monetary credibility problems 1. In ation and discretionary monetary policy 2. Reputational solution
More informationLectures on Trading with Information Competitive Noisy Rational Expectations Equilibrium (Grossman and Stiglitz AER (1980))
Lectures on Trading with Information Competitive Noisy Rational Expectations Equilibrium (Grossman and Stiglitz AER (980)) Assumptions (A) Two Assets: Trading in the asset market involves a risky asset
More informationDiscussion of The Role of Expectations in Inflation Dynamics
Discussion of The Role of Expectations in Inflation Dynamics James H. Stock Department of Economics, Harvard University and the NBER 1. Introduction Rational expectations are at the heart of the dynamic
More informationTwo-Period-Ahead Forecasting For Investment Management In The Foreign Exchange
Two-Period-Ahead Forecasting For Investment Management In The Foreign Exchange Konstantins KOZLOVSKIS, Natalja LACE, Julija BISTROVA, Jelena TITKO Faculty of Engineering Economics and Management, Riga
More informationThe Thirteenth Dubrovnik Economic Conference
The Thirteenth Dubrovnik Economic Conference Organized by the Croatian National Bank Ljubinko Jankov, Ivo Krznar, Davor Kunovac, and Maroje Lang The Impact of the USD/EUR Exchange rate on Inflation in
More informationSTOCK RETURNS AND INFLATION: THE IMPACT OF INFLATION TARGETING
STOCK RETURNS AND INFLATION: THE IMPACT OF INFLATION TARGETING Alexandros Kontonikas a, Alberto Montagnoli b and Nicola Spagnolo c a Department of Economics, University of Glasgow, Glasgow, UK b Department
More information1. Money in the utility function (continued)
Monetary Economics: Macro Aspects, 19/2 2013 Henrik Jensen Department of Economics University of Copenhagen 1. Money in the utility function (continued) a. Welfare costs of in ation b. Potential non-superneutrality
More informationConsumption and Portfolio Choice under Uncertainty
Chapter 8 Consumption and Portfolio Choice under Uncertainty In this chapter we examine dynamic models of consumer choice under uncertainty. We continue, as in the Ramsey model, to take the decision of
More informationOptimal Portfolios and Random Matrices
Optimal Portfolios and Random Matrices Javier Acosta Nai Li Andres Soto Shen Wang Ziran Yang University of Minnesota, Twin Cities Mentor: Chris Bemis, Whitebox Advisors January 17, 2015 Javier Acosta Nai
More information1. Money in the utility function (start)
Monetary Policy, 8/2 206 Henrik Jensen Department of Economics University of Copenhagen. Money in the utility function (start) a. The basic money-in-the-utility function model b. Optimal behavior and steady-state
More informationPredicting Inflation without Predictive Regressions
Predicting Inflation without Predictive Regressions Liuren Wu Baruch College, City University of New York Joint work with Jian Hua 6th Annual Conference of the Society for Financial Econometrics June 12-14,
More informationInterdependence and Exchange Rates
Interdependence and Exchange Rates Doireann Fitzgerald y UC-Santa Cruz December 2003 Abstract I use a multi-country general equilibrium trade model to illustrate how asymmetric relations between countries
More informationSubnational Debt Sustainability Analysis. Case Study DSA using Analytica Buenos Aires, Argentina
Subnational Debt Sustainability Analysis Case Study DSA using Analytica Buenos Aires, Argentina Buenos Aires: Issues of Interest Defining sustainability at sub-national level: Buenos Aires: Federal Fiscal
More informationForecasting the Brazilian Yield Curve Using Forward- Looking Variables
1 Forecasting the Brazilian Yield Curve Using Forward- Looking Variables Fausto Vieira Sao Paulo School of Economics Fundação Getulio Vargas Marcelo Fernandes Sao Paulo School of Economics Fundação Getulio
More informationJournal of Central Banking Theory and Practice, 2017, 1, pp Received: 6 August 2016; accepted: 10 October 2016
BOOK REVIEW: Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian... 167 UDK: 338.23:336.74 DOI: 10.1515/jcbtp-2017-0009 Journal of Central Banking Theory and Practice,
More informationCommon Macro Factors and Their Effects on U.S Stock Returns
2011 Common Macro Factors and Their Effects on U.S Stock Returns IBRAHIM CAN HALLAC 6/22/2011 Title: Common Macro Factors and Their Effects on U.S Stock Returns Name : Ibrahim Can Hallac ANR: 374842 Date
More informationMacroeconomic Cycle and Economic Policy
Macroeconomic Cycle and Economic Policy Lecture 1 Nicola Viegi University of Pretoria 2016 Introduction Macroeconomics as the study of uctuations in economic aggregate Questions: What do economic uctuations
More information1. Cash-in-Advance models a. Basic model under certainty b. Extended model in stochastic case. recommended)
Monetary Economics: Macro Aspects, 26/2 2013 Henrik Jensen Department of Economics University of Copenhagen 1. Cash-in-Advance models a. Basic model under certainty b. Extended model in stochastic case
More informationStatistical Evidence and Inference
Statistical Evidence and Inference Basic Methods of Analysis Understanding the methods used by economists requires some basic terminology regarding the distribution of random variables. The mean of a distribution
More informationVolume 29, Issue 2. Measuring the external risk in the United Kingdom. Estela Sáenz University of Zaragoza
Volume 9, Issue Measuring the external risk in the United Kingdom Estela Sáenz University of Zaragoza María Dolores Gadea University of Zaragoza Marcela Sabaté University of Zaragoza Abstract This paper
More informationDiscussion of No-Arbitrage Near-Cointegrated VAR(p) Term Structure Models, Term Premia and GDP Growth by C. Jardet, A. Monfort and F.
Discussion of No-Arbitrage Near-Cointegrated VAR(p) Term Structure Models, Term Premia and GDP Growth by C. Jardet, A. Monfort and F. Pegoraro R. Mark Reesor Department of Applied Mathematics The University
More informationNot All Oil Price Shocks Are Alike: A Neoclassical Perspective
Not All Oil Price Shocks Are Alike: A Neoclassical Perspective Vipin Arora Pedro Gomis-Porqueras Junsang Lee U.S. EIA Deakin Univ. SKKU December 16, 2013 GRIPS Junsang Lee (SKKU) Oil Price Dynamics in
More informationRating Based Modeling of Credit Risk Theory and Application of Migration Matrices
Rating Based Modeling of Credit Risk Theory and Application of Migration Matrices Preface xi 1 Introduction: Credit Risk Modeling, Ratings, and Migration Matrices 1 1.1 Motivation 1 1.2 Structural and
More informationMonetary Economics Lecture 5 Theory and Practice of Monetary Policy in Normal Times
Monetary Economics Lecture 5 Theory and Practice of Monetary Policy in Normal Times Targets and Instruments of Monetary Policy Nicola Viegi August October 2010 Introduction I The Objectives of Monetary
More informationCzech Koruna and the Economic Outlook
Czech Koruna and the Economic Outlook Vladimír Tomšík Vice-Governor Czech National Bank Austrian-Czech Economic Forum Czech National Bank Congress Centre Prague, 7 June 17 Outline 1. The CNB s exchange
More informationMicro Theory I Assignment #5 - Answer key
Micro Theory I Assignment #5 - Answer key 1. Exercises from MWG (Chapter 6): (a) Exercise 6.B.1 from MWG: Show that if the preferences % over L satisfy the independence axiom, then for all 2 (0; 1) and
More informationPolicy evaluation and uncertainty about the e ects of oil prices on economic activity
Policy evaluation and uncertainty about the e ects of oil prices on economic activity Francesca Rondina y University of Wisconsin - Madison Job Market Paper January 10th, 2009 (comments welcome) Abstract
More informationTopic 4: Introduction to Exchange Rates Part 1: Definitions and empirical regularities
Topic 4: Introduction to Exchange Rates Part 1: Definitions and empirical regularities - The models we studied earlier include only real variables and relative prices. We now extend these models to have
More informationImproving Forecast Accuracy of Financial Vulnerability: Partial Least Squares Factor Model Approach
Improving Forecast Accuracy of Financial Vulnerability: Partial Least Squares Factor Model Approach Hyeongwoo Kim *, Kyunghwan Ko ** The views expressed herein are those of the authors and do not necessarily
More informationBlame the Discount Factor No Matter What the Fundamentals Are
Blame the Discount Factor No Matter What the Fundamentals Are Anna Naszodi 1 Engel and West (2005) argue that the discount factor, provided it is high enough, can be blamed for the failure of the empirical
More informationWhat do the shadow rates tell us about future inflation?
MPRA Munich Personal RePEc Archive What do the shadow rates tell us about future inflation? Annika Kuusela and Jari Hännikäinen University of Jyväskylä, University of Tampere 1 August 2017 Online at https://mpra.ub.uni-muenchen.de/80542/
More informationOn the Forecasting of Realized Volatility and Covariance - A multivariate analysis on high-frequency data 1
1 On the Forecasting of Realized Volatility and Covariance - A multivariate analysis on high-frequency data 1 Daniel Djupsjöbacka Market Maker / Researcher daniel.djupsjobacka@er-grp.com Ronnie Söderman,
More informationCAN OIL PRICES FORECAST EXCHANGE RATES?
CAN OL PRCES FORECAST EXCHANGE RATES? Discussion by Patrizio Pagano Banca d talia patrizio.pagano@bancaditalia.it November 19, 2012 Monetary Policy and Commodity Prices Workshop 2 Questions 1. (Narrow)
More informationModeling and Forecasting the Yield Curve
Modeling and Forecasting the Yield Curve III. (Unspanned) Macro Risks Michael Bauer Federal Reserve Bank of San Francisco April 29, 2014 CES Lectures CESifo Munich The views expressed here are those of
More informationA Sensitivity Analysis between Common Risk Factors and Exchange Traded Funds
A Sensitivity Analysis between Common Risk Factors and Exchange Traded Funds Tahura Pervin Dept. of Humanities and Social Sciences, Dhaka University of Engineering & Technology (DUET), Gazipur, Bangladesh
More informationFactor Forecasting for Agricultural Production Processes
Factor Forecasting for Agricultural Production Processes Wenjun Zhu Assistant Professor Nanyang Business School, Nanyang Technological University wjzhu@ntu.edu.sg Joint work with Hong Li, Ken Seng Tan,
More informationExpected Utility and Risk Aversion
Expected Utility and Risk Aversion Expected utility and risk aversion 1/ 58 Introduction Expected utility is the standard framework for modeling investor choices. The following topics will be covered:
More informationDiscussion Paper No. DP 07/05
SCHOOL OF ACCOUNTING, FINANCE AND MANAGEMENT Essex Finance Centre A Stochastic Variance Factor Model for Large Datasets and an Application to S&P data A. Cipollini University of Essex G. Kapetanios Queen
More informationGDP, Share Prices, and Share Returns: Australian and New Zealand Evidence
Journal of Money, Investment and Banking ISSN 1450-288X Issue 5 (2008) EuroJournals Publishing, Inc. 2008 http://www.eurojournals.com/finance.htm GDP, Share Prices, and Share Returns: Australian and New
More informationAsymmetric fan chart a graphical representation of the inflation prediction risk
Asymmetric fan chart a graphical representation of the inflation prediction ASYMMETRIC DISTRIBUTION OF THE PREDICTION RISK The uncertainty of a prediction is related to the in the input assumptions for
More informationRobust portfolio optimization
Robust portfolio optimization Carl Lindberg Department of Mathematical Sciences, Chalmers University of Technology and Göteborg University, Sweden e-mail: h.carl.n.lindberg@gmail.com Abstract It is widely
More informationMonetary and exchange rate policies in the Central and Eastern Europe: lessons and challenges. Jakub Borowski
Monetary and exchange rate policies in the Central and Eastern Europe: lessons and challenges Jakub Borowski Chief Economist Credit Agricole Bank Polska S.A. Building Market Economies in Europe: Lessons
More informationEquilibrium Asset Returns
Equilibrium Asset Returns Equilibrium Asset Returns 1/ 38 Introduction We analyze the Intertemporal Capital Asset Pricing Model (ICAPM) of Robert Merton (1973). The standard single-period CAPM holds when
More informationExchange Rate Forecasting
Exchange Rate Forecasting Controversies in Exchange Rate Forecasting The Cases For & Against FX Forecasting Performance Evaluation: Accurate vs. Useful A Framework for Currency Forecasting Empirical Evidence
More informationThe relationship between output and unemployment in France and United Kingdom
The relationship between output and unemployment in France and United Kingdom Gaétan Stephan 1 University of Rennes 1, CREM April 2012 (Preliminary draft) Abstract We model the relation between output
More informationMonetary policy in a data-rich environment $
COLUMBIA BUSINESS SCHOOL 1 Journal of Monetary Economics 50 (2003) 525 546 Monetary policy in a data-rich environment $ Ben S. Bernanke a, *, Jean Boivin b a Department of Economics, Princeton University,
More informationForecast Audit towards 2016 Gross Domestic Product as Influence of Financial Growth and the ASEAN Economic Community Preparation
Forecast Audit towards 2016 Gross Domestic Product as Influence of Financial Growth and the ASEAN Economic Community Preparation Mutiara Shifa Economics Department, State University of Medan, Medan 20221,
More informationApplied Macro Finance
Master in Money and Finance Goethe University Frankfurt Week 2: Factor models and the cross-section of stock returns Fall 2012/2013 Please note the disclaimer on the last page Announcements Next week (30
More informationA Simple Recursive Forecasting Model
A Simple Recursive Forecasting Model William A. Branch University of California, Irvine George W. Evans University of Oregon February 1, 2005 Abstract We compare the performance of alternative recursive
More informationMacroeconomic Uncertainty Indices Based on Nowcast and Forecast Error Distributions Online Appendix
Macroeconomic Uncertainty Indices Based on Nowcast and Forecast Error Distributions Online Appendix Barbara Rossi and Tatevik Sekhposyan January, 5 This Appendix contains five sections. Section reports
More informationA Granular Interpretation to Inflation Variations
A Granular Interpretation to Inflation Variations José Miguel Alvarado a Ernesto Pasten b Lucciano Villacorta c a Central Bank of Chile b Central Bank of Chile b Central Bank of Chile May 30, 2017 Abstract
More informationForecasting Macroeconomic Variables for the Acceding Countries *
Forecasting Macroeconomic Variables for the Acceding Countries * Anindya Banerjee # Massimiliano Marcellino Department of Economics IEP-Bocconi University, IGIER European University Institute and CEPR
More informationBehavioural Equilibrium Exchange Rate (BEER)
Behavioural Equilibrium Exchange Rate (BEER) Abstract: In this article, we will introduce another method for evaluating the fair value of a currency: the Behavioural Equilibrium Exchange Rate (BEER), a
More informationMonetary Policy and the Open Economy. Jordi Galí. July 2007
Lectures on Monetary Policy, In ation and the Business Cycle Monetary Policy and the Open Economy by Jordi Galí July 2007 Motivation The basic new Keynesian model for the closed economy - equilibrium dynamics:
More information1. Monetary credibility problems. 2. In ation and discretionary monetary policy. 3. Reputational solution to credibility problems
Monetary Economics: Macro Aspects, 7/4 2010 Henrik Jensen Department of Economics University of Copenhagen 1. Monetary credibility problems 2. In ation and discretionary monetary policy 3. Reputational
More informationMacro Factors in Bond Risk Premia
Macro Factors in Bond Risk Premia Sydney C. Ludvigson New York University and NBER Serena Ng Columbia University Are there important cyclical fluctuations in bond market premiums and, if so, with what
More information