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Showing results 1 to 10 of approximately 13.
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Speech
Improving the measurement of inflation expectations
Remarks at the Barclays 16th Annual Global Inflation-Linked Conference, New York City.
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 Paper
The Role of Oil Price Shocks in Causing U.S. Recessions
Although oil price shocks have long been viewed as one of the leading candidates for explaining U.S. recessions, surprisingly little is known about the extent to which oil price shocks explain recessions. We provide a formal analysis of this question with special attention to the possible role of net oil price increases in amplifying the transmission of oil price shocks. We quantify the conditional recessionary effect of oil price shocks in the net oil price increase model for all episodes of net oil price increases since the mid-1970s. Compared to the linear model, the cumulative effect of ...
Working Paper
Does the Yield Curve Predict Output?
Does the yield curve have the ability to predict output and recessions? At some times and in certain places, of course! But many details are matters of dispute: When and where does the yield curve predict successfully, which aspects of the curve matter most, and which economic forces account for the predictive ability? Over the years, an increasingly sophisticated set of tools, both statistical and theoretical, have addressed these issues. For the US, an inverted yield curve, particularly when the spread between the yield on 10-year and 3-month Treasuries becomes negative, has been a robust ...
Working Paper
Subjective probabilities: psychological evidence and economic applications
Real-life decision makers are often forced to estimate the likelihood of uncertain future events. Usually, economists assume that agents behave as though they are fully rational, employing statistical rules to assess probabilities, and that they maximize expected utility. Psychological studies, however, have shown that people tend not to adhere to these rationality postulates. We review three rules of thumb taken from the psychology literature that people have been shown to rely on when assessing the likelihood of uncertain events. We construct a simple model of belief formation that ...
Working Paper
Tests of Conditional Predictive Ability: Existence, Size, and Power
We investigate a test of conditional predictive ability described in Giacomini and White (2006; Econometrica). Our main goal is simply to demonstrate existence of the null hypothesis and, in doing so, clarify just how unlikely it is for this hypothesis to hold. We do so using a simple example of point forecasting under quadratic loss. We then provide simulation evidence on the size and power of the test. While the test can be accurately sized we find that power is typically low.
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 Paper
Modeling Time-Varying Uncertainty of Multiple-Horizon Forecast Errors
We develop uncertainty measures for point forecasts from surveys such as the Survey of Professional Forecasters, Blue Chip, or the Federal Open Market Committee's Summary of Economic Projections. At a given point of time, these surveys provide forecasts for macroeconomic variables at multiple horizons. To track time-varying uncertainty in the associated forecast errors, we derive a multiple-horizon specification of stochastic volatility. Compared to constant-variance approaches, our stochastic-volatility model improves the accuracy of uncertainty measures for survey forecasts.
Working Paper
Bootstrapping out-of-sample predictability tests with real-time data
In this paper we develop a block bootstrap approach to out-of-sample inference when real-time data are used to produce forecasts. In particular, we establish its first-order asymptotic validity for West-type (1996) tests of predictive ability in the presence of regular data revisions. This allows the user to conduct asymptotically valid inference without having to estimate the asymptotic variances derived in Clark and McCracken’s (2009) extension of West (1996) when data are subject to revision. Monte Carlo experiments indicate that the bootstrap can provide satisfactory finite sample size ...
Report
Belief updating among college students: evidence from experimental variation in information
We investigate how college students form and update their beliefs about future earnings using a unique ?information? experiment. We provide college students true information about the population distribution of earnings and observe how this information causes respondents to update their beliefs about their own future earnings. We show that college students are substantially misinformed about population earnings and logically revise their self-beliefs in response to the information we provide, with larger revisions when the information is more specific and is good news. We classify the ...