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Discussion Paper
Recursive estimation and modelling of nonstationary and nonlinear time series
This paper presents a unified approach to nonlinear and nonstationary time-series analysis for a fairly wide class of linear time variable parameter (TVP) or nonlinear systems. The method theory exploits recursive filtering and fixed interval smoothing algorithms to derive TVP linear model approximations to the nonlinear or nonstationary stochastic system, on the basis of data obtained from the system during planned experiments or passive monitoring exercises. This TVP model includes the State Dependent type of Model (SDM) as a special case, and two particular SDM forms, due to Priestly and ...
Journal Article
The U.S. economy in 1989 and 1990: walking a fine line
Journal Article
Are economic forecasts rational?
This paper discusses at an undergraduate level how forecast rationality can be tested. It explains that forecasters should correctly use any relevant information they knew in making their predictions. It shows that forecast rationality can be tested by determining whether the forecasters' prediction errors are predictable. After addressing what data and methods can be used for testing rationality, the paper presents tests of the price-forecast rationality of individual professional forecasters. Unlike results of previous studies, the test results show that those forecasters' price predictions ...
Journal Article
A bleak outlook for the U.S. economy
Economic activity in the United States has been growing more slowly than average for the past three years, and it is not likely to speed up soon. The slow growth has been due primarily to pessimism among consumers about their long-run personal income. That pessimism?and its extension to the U.S. economy as a whole?is confirmed by data on real estate prices and labor force participation and by the 1992?93 forecast of a Bayesian vector autoregression model.
Journal Article
No relief in sight for the U.S. economy
For at least the next two years, the U.S. economy will grow more slowly than it has on average since World War II. This is the forecast of a Bayesian vector autoregression model developed and used by researchers at the Minneapolis Federal Reserve Bank. The model's previous forecast?of a very weak start to the 1991?92 recovery?was remarkably accurate. Both forecasts are supported by evidence on long-term problems among consumers, in the commercial real estate industry, and at all levels of government. These problems will most likely constrain economic growth for years, although short spurts of ...
Journal Article
Learning to be unpredictable : an experimental study.
This study tests experimentally whether the ability of subjects to play a noncooperative game's mixed-strategy equilibrium (to make their play unpredictable) is affected by how much information subjects have about the structure of the game. Subjects played the mixed-strategy equilibrium when they had all the information about other players' payoffs and actions, but not otherwise. Previous research has shown that players of a game can play a mixed-strategy equilibrium if they observe the actions of all players and use sophisticated Bayesian learning to infer the likely payoffs to other ...
Journal Article
Why no crunch from the crash?
Journal Article
Revisionist history: how data revisions distort economic policy research
This article describes how and why official U.S. estimates of the growth in real economic output and inflation are revised over time, demonstrates how big those revisions tend to be, and evaluates whether the revisions matter for researchers trying to understand the economy?s performance and the contemporaneous reactions of policymakers. The conclusion may seem obvious, but it is a point ignored by most researchers: To have a good chance of understanding how policymakers make their decisions, researchers must use not the final data available, but the data available initially, when the policy ...