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Author:McCracken, Michael W. 

Working Paper
Diverging Tests of Equal Predictive Ability

We investigate claims made in Giacomini and White (2006) and Diebold (2015) regarding the asymptotic normality of a test of equal predictive ability. A counterexample is provided in which, instead, the test statistic diverges with probability one under the null.
Working Papers , Paper 2019-018

Journal Article
Factor-based prediction of industry-wide bank stress

This article investigates the use of factor-based methods for predicting industry-wide bank stress. Specifically, using the variables detailed in the Federal Reserve Board of Governors? bank stress scenarios, the authors construct a small collection of distinct factors. We then investigate the predictive content of these factors for net charge-offs and net interest margins at the bank industry level. The authors find that the factors do have significant predictive content, both in and out of sample, for net interest margins but significantly less predictive content for net charge-offs. ...
Review , Volume 96 , Issue 2 , Pages 173-194

Journal Article
Using FOMC forecasts to forecast the economy

FOMC members have incentives to construct their forecasts strategically.
Economic Synopses

Working Paper
Averaging forecasts from VARs with uncertain instabilities

Recent work suggests 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. The uncertainty inherent in any single representation of instability could mean that combining forecasts from a range of approaches will improve forecast accuracy. Focusing on models of U.S. output, prices, and interest rates, this paper examines the effectiveness of combining various models of instability in improving VAR forecasts made with ...
Working Papers , Paper 2008-030

Working Paper
Forecasting with small macroeconomic VARs in the presence of instabilities

Small-scale VARs are widely used in macroeconomics for forecasting U.S. output, prices, and interest rates. However, recent work suggests these models may exhibit instabilities. As such, a variety of estimation or forecasting methods might be used to improve their forecast accuracy. These include using different observation windows for estimation, intercept correction, time-varying parameters, break dating, Bayesian shrinkage, model averaging, etc. This paper compares the effectiveness of such methods in real time forecasting. We use forecasts from univariate time series models, the Survey of ...
Finance and Economics Discussion Series , Paper 2007-41

Working Paper
Real-time forecast averaging with ALFRED

This paper presents empirical evidence on the efficacy of forecast averaging using the ALFRED real-time database. We consider averages taken over a variety of different bivariate VAR models that are distinguished from one another based upon at least one of the following: which variables are used as predictors, the number of lags, using all available data or data after the Great Moderation, the observation window used to estimate the model parameters and construct averaging weights, and for forecast horizons greater than one, whether or not iterated- or direct-multistep methods are used. A ...
Working Papers , Paper 2010-033

Journal Article
Disagreement at the FOMC: the dissenting votes are just part of the story

Recently released data on economic forecasts made by voting and nonvoting members of the FOMC suggest that there is more disagreement than the voting record indicates.
The Regional Economist , Issue Oct , Pages 10-16

Journal Article
Should food be excluded from core CPI?

The greater a component?s SNR, the more useful the component should be in forecasting headline CPI.
Economic Synopses

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 ...
Finance and Economics Discussion Series , Paper 2007-42

Working Paper
Multi-step ahead forecasting of vector time series

This paper develops the theory of multi-step ahead forecasting for vector time series that exhibit temporal nonstationarity and co-integration. We treat the case of a semi-infinite past, developing the forecast filters and the forecast error filters explicitly, and also provide formulas for forecasting from a finite-sample of data. This latter application can be accomplished by the use of large matrices, which remains practicable when the total sample size is moderate. Expressions for Mean Square Error of forecasts are also derived, and can be implemented readily. Three diverse data ...
Working Papers , Paper 2012-060

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