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Author:McCracken, Michael W. 

Working Paper
Real-Time Forecasting with a Large, Mixed Frequency, Bayesian VAR

We assess point and density forecasts from a mixed-frequency vector autoregression (VAR) to obtain intra-quarter forecasts of output growth as new information becomes available. The econometric model is specified at the lowest sampling frequency; high frequency observations are treated as different economic series occurring at the low frequency. We impose restrictions on the VAR to account explicitly for the temporal ordering of the data releases. Because this type of data stacking results in a high-dimensional system, we rely on Bayesian shrinkage to mitigate parameter proliferation. The ...
Working Papers , Paper 2015-30

Working Paper
Tests of Conditional Predictive Ability: A Comment

We investigate a test of equal predictive ability delineated in Giacomini and White (2006; Econometrica). In contrast to a claim made in the paper, we show that their test statistic need not be asymptotically Normal when a fixed window of observations is used to estimate model parameters. An example is provided in which, instead, the test statistic diverges with probability one under the null. Simulations reinforce our analytical results.
Working Papers , Paper 2019-18

Working Paper
Growth-at-Risk is Investment-at-Risk

We investigate the role financial conditions play in the composition of U.S. growth-at-risk. We document that, by a wide margin, growth-at-risk is investment-at-risk. That is, if financial conditions indicate U.S. real GDP growth will be in the lower tail of its conditional distribution, we know that the main contributor is a decline in investment. Consumption contributes under extreme financial stress. Government spending and net exports do not play a role.
Working Papers , Paper 2023-020

Working Paper
Reality checks and nested forecast model comparisons

This paper develops a novel and effective bootstrap method for simulating asymptotic critical values for tests of equal forecast accuracy and encompassing among many nested models. The bootstrap, which combines elements of fixed regressor and wild bootstrap methods, is simple to use. We first derive the asymptotic distributions of tests of equal forecast accuracy and encompassing applied to forecasts from multiple models that nest the benchmark model ? that is, reality check tests applied to nested models. We then prove the validity of the bootstrap for these tests. Monte Carlo experiments ...
Working Papers , Paper 2010-032

Will High Inflation Persist?

The answer to when inflation will revert to its long-run average likely depends on whether we are still in the “Great Moderation” regime of less volatile inflation.
On the Economy

Market-Based Measures of Inflation Risks

Forecasts typically focus on estimates of expected inflation, but some forecasts look at the probability of different inflation rates in the future.
On the Economy

Working Paper
Consistent testing for structural change at the ends of the sample

In this paper we provide analytical and Monte Carlo evidence that Chow and Predictive tests can be consistent against alternatives that allow structural change to occur at either end of the sample. Attention is restricted to linear regression models that may have a break in the intercept. The results are based on a novel reparameterization of the actual and potential break point locations. Standard methods parameterize both of these locations as fixed fractions of the sample size. We parameterize these locations as more general integer valued functions. Power at the ends of the sample is ...
Working Papers , Paper 2012-029

What Do Components of Key Inflation Measures Say about Future Inflation?

A new analysis suggests that the food expenditures category of the consumer price index could be a useful signal of future headline inflation.
On the Economy

Working Paper
Averaging forecasts from VARs with uncertain instabilities

A body of recent work suggests commonly?used VAR models of output, inflation, and interest rates may be prone to instabilities. In the face of such instabilities, a variety of estimation or forecasting methods might be used to improve the accuracy of forecasts from a VAR. These methods include using different approaches to lag selection, different observation windows for estimation, (over-) differencing, intercept correction, stochastically time?varying parameters, break dating, discounted least squares, Bayesian shrinkage, and detrending of inflation and interest rates. Although each ...
Research Working Paper , Paper RWP 06-12

Journal Article
A Macroeconomic News Index for Constructing Nowcasts of U.S. Real Gross Domestic Product Growth

Analyzing the performance of the economy in real time is a challenge for those who must forecast macroeconomic variables such as inflation or employment. A key aspect of this challenge is evaluating the incoming flow of information contained in economic announcements. In this article, the authors develop a simple-to-read index of these announcements that they then use to construct nowcasts. The index tracks whether key economic data have come in stronger, weaker, or as expected during the current quarter relative to a baseline consensus forecast. Specifically, the data releases are weighted ...
Review , Volume 98 , Issue 4 , Pages 277-296


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