Search Results
Working Paper
Evaluating density forecasts
The authors propose methods for evaluating and improving density forecasts. They focus primarily on methods that are applicable regardless of the particular user's loss function, though they take explicit account of the relationships between density forecasts, action choices, and the corresponding expected loss throughout. They illustrate the methods with a detailed series of examples, and they discuss extensions to improving and combining suboptimal density forecasts, multistep-ahead density forecast evaluation, multivariate density forecast evaluation, monitoring for structural change and ...
Working Paper
Modeling bond yields in finance and macroeconomics
From a macroeconomic perspective, the short-term interest rate is a policy instrument under the direct control of the central bank. From a finance perspective, long rates are risk-adjusted averages of expected future short rates. Thus, as illustrated by much recent research, a joint macro-finance modeling strategy will provide the most comprehensive understanding of the term structure of interest rates. We discuss various questions that arise in this research, and we also present a new examination of the relationship between two prominent dynamic, latent factor models in this literature: the ...
Working Paper
Exact maximum likelihood estimation of ARCH models
Discussion Paper
On maximum-likelihood estimation of the differencing parameter of fractionally integrated noise with unknown mean
There are two approaches to maximum likelihood (ML) estimation of the parameter of fractionally-integrated noise: approximate frequency-domain ML (Fox and Taqqwu, 1986) and exact time-domain ML (Solwell, 1990a). If the mean of the process is known, then a clear finite-sample mean-squared error (MSE) ranking of the estimators emerges: the exact time-domain estimator has smaller MSE. We show in this paper, however, that the finite-sample efficiency of approximate frequency-domain ML relative to exact time-domain ML rises dramatically when the mean result is unknown and instead must be ...
Working Paper
Real-time macroeconomic monitoring: real activity, inflation, and interactions
The authors sketch a framework for monitoring macroeconomic activity in real-time and push it in new directions. In particular, they focus not only on real activity, which has received most attention to date, but also on inflation and its interaction with real activity. As for the recent recession, the authors find that (1) it likely ended around July 2009; (2) its most extreme aspects concern a real activity decline that was unusually long but less unusually deep, and an inflation decline that was unusually deep but brief; and (3) its real activity and inflation interactions were strongly ...
Discussion Paper
Have postwar economic fluctuations been stabilized?
Previous investigations of whether the volatility of the U.S. economy diminished after World War II have been inconclusive because of questionable prewar macroeconomic aggregates. We examine, more broadly, the hypothesis of the stabilization of the postwar economy by focusing on the duration of business cycles, rather than their amplitude; in the process, we avoid the debate about the quality of prewar aggregates. Using distribution-free statistics, we find clear evidence of postwar duration stabilization in terms of a shift toward longer expansions and shorter contractions. Moreover, we find ...
Working Paper
Measuring financial asset return and volatility spillovers, with application to global equity markets
The authors provide a simple and intuitive measure of interdependence of asset returns and/or volatilities. In particular, they formulate and examine precise and separate measures of return spillovers and volatility spillovers. The authors framework facilitates study of both noncrisis and crisis episodes, including trends and bursts in spillovers, and both turn out to be empirically important. In particular, in an analysis of 19 global equity markets from the early 1990s to the present, they find striking evidence of divergent behavior in the dynamics of return spillovers vs. volatility ...
Discussion Paper
International evidence on business cycle duration dependence
We provide an investigation of duration dependence in prewar business expansions, contractions, and whole cycles for France, Germany, and Great Britain. Our results, obtained using both nonparametric and parametric procedures, generally indicate the presence of positive duration dependence in expansions and whole cycles but not in contractions. Our results corroborate those of our earlier studies of the United States.