forecasting quarterly brazilian gdp growth rate with linear and non linear diffusion inex models this paper uses linear and non linear diffusion index models and combination of them to produce one step ahead forecast of quarterly brazilian gdp growth rate the non linear diffusion index models are not only parsimonious ones but they also purport to describe economic cycles through a threshold diffusion index model and a markov switching diffusion index model

hedging sudden stops and precautionary contractions abstract even well managed emerging market economies are exposed to significant external risk the bulk of which is financial at a moment s notice these economies may be required to reverse the capital inflows that have supported the preceding boom while capital flows crises are sudden nonlinear events sudden stops their likelihood fluctuates over time the question we address in the paper is how should a country react to these fluctuations depending on the hedging possibilities the country faces the options range from pure self insurance to hedging the sudden stop jump itself in between there is the more likely possibility to hedge the smoother fluctuations in the likelihood of sudden stops the main contribution of the paper is to provide an analytically and empirically tractable model that allows us to characterize and quantify optimal contingent liability management in a variety of scenarios we show with a concrete example that the gains from contingent liability management can easily exceed the equivalent of cutting a country s external liabilities by 10 of gdp

poverty in eastern europe in the years of crisis 1978 to 1987 poland hungary and yugoslavia eastern europe experienced an economic crisis between 1978 and 1987 declining income led to substantial increases in poverty rates in poland and yugoslavia while poverty in hungary remained at about the same level as before the crisis in all three countries urban poverty increased as the economic condition of state sector workers deteriorated to a much greater extent than that of agricultural and mixed households the increased poverty was entirely explained by declining income because the overall income distribution did not change or in some cases improved

efficient non contractible investments in large economies abstract do investors making complementary investments face the correct incentives especially when they cannot contract with each other prior to their decisions we present a two sided matching model in which buyers and sellers make investments prior to matching once matched buyer and seller bargain over the price taking into account outside options efficient decisions can always be sustained in equilibrium we characterize the inefficiencies that can arise in equilibrium and show that equilibria will be constrained efficient we also show that the degree of diversity in a large market has implications for the extent of any inefficiency journal of economic literature classification numbers c78 d41 d51

dynamic forecasts of qualitative variables a qual var model of u s recessions this article presents a new qual var model for incorporating information from qualitative and or discrete variables in vector autoregressions with a qual var it is possible to create dynamic forecasts of the qualitative variable using standard var projections previous forecasting methods for qualitative variables in contrast produce only static forecasts i apply the qual var to forecasting the 2001 business recession out of sample and to analyzing the romer and romer narrative measure of monetary policy contractions as an endogenous variable in a var out of sample the model predicts the timing of the 2001 recession quite well relative to the recession probabilities put forth at the time by professional forecasters qual vars which include information about the qualitative variable can also enhance the quality of density forecasts of the other variables in the system

the pre marital investment game abstract two sides of a finite marriage market engage in costly investment and are then matched assortatively the purpose of the investment is solely to improve the quality of the match that the trader can attain in the second stage the paper studies the limits of equilibrium of these finite matching games as the number of traders gets large it is shown that mixed nash equilibria in the finite games converge to degenerate pure strategy equilibria in the limit in which both sides of the market invest too much

regime switching in the reactions of stock markets in saudi arabia to oil price variations the study revisits the stock oil nexus by examining the reactions of equity markets to oil price shocks at national and sectoral levels for saudi arabia in a time varying framework by employing the markov switching egarch model developed by henry 2009 journal of banking and finance 33 405 based on weekly data the findings reveal that the behaviour of all stock markets switches between an expansion regime and a recession regime with more persistence for the expansion state additionally influential international events associated with stock market drops are clearly identified in the recession regime furthermore there is evidence of asymmetric reactions of the equity index returns and the probabilities of transition from one state to another to oil price variations with heterogeneous impacts across sectors and regimes the stock markets are more sensitive to oil price decreases than to oil price increases although the evidence of relatively slight differences in some findings across weekdays the study allows investors and policymakers to understand well the interactions of stock sector markets vis a vis the world oil market in a regime switching framework in order to make the right decision as regards portfolio diversification and regulation of the stock markets

forecasting macro variables with a qual var business cycle turning point index one criticism of vector autoregression var forecasting is that macroeconomic variables tend not to behave as linear functions of their own past around business cycle turning points a large amount of literature therefore focuses on nonlinear forecasting models such as markov switching models which only indirectly capture the relation with turning points this article investigates a direct approach to using information on turning points from the national bureau of economic research nber chronology to model and forecast macroeconomic data our qual var model includes a truncated normal latent business cycle index that is negative during nber recessions and positive during expansions we motivate our forecasting exercise by demonstrating that if starting from a linear specification a truncated normal variable is an omitted variable then forecasts of the remaining variables will become nonlinear functions of their own past we apply the qual var model to recursive out of sample forecasting and find th

was the recent downturn in us real gdp predictable this article uses a small set of variables real gdp the inflation rate and the short term interest rate and a rich set of models atheoretical time series and theoretical structural linear and nonlinear as well as classical and bayesian models to consider whether we could have predicted the recent downturn of the us real gdp comparing the performance of the models to the benchmark random walk model by root mean square errors the two structural theoretical models especially the nonlinear model perform well on average across all forecast horizons in our ex post out of sample forecasts although at specific forecast horizons certain nonlinear atheoretical models perform the best the nonlinear theoretical model also dominates in our ex ante out of sample forecast of the great recession suggesting that developing forward looking microfounded nonlinear dynamic stochastic general equilibrium models of the economy may prove crucial in forecasting turning points

pre matching gambles abstract this paper investigates pre matching gambles and provides a new reason to gamble matching concerns examples of pre matching gambles include occupational choices before the marriage market college major choices before the labor market and portfolio management before attracting future clients in the financial market i show that people make risky investments they would not have made if not for their subsequent participation in a competitive matching market a fundamental and unique feature of the competitive matching market which i call the competitive matching effect induces gambling the paper also illustrates the relationship between social efficiency and inequality in this setting and shows how progressive taxation eliminates social inefficiency reduces inequality and generates government revenue

source of monetary growth uncertainty and economic activity the time varying parameter model a large body of research suggests that uncertainty is an important factor affecting economic activity most earlier research however fails to consider the possibility that uncertainty may affect the value of new information and economic activity differently depending upon its source the author first examines the importance of these different sources for modeling u s monetary growth uncertainty he then empirically relates different sources of monetary growth uncertainty to economic activity measured by real gnp the results suggest that different sources of uncertainty have different impacts on economic activity the results tend to confirm predictions arising in the literature on irreversible investment and uncertainty copyright 1993 by mit press

do long swings in the business cycle lead to strong persistence in output abstract this paper investigates how the occasional long swing in the business cycle can produce long memory behavior in us output to prove this theoretical relationship we extend the hamilton markov chain regime switching model of real aggregate output to include the occasional long regime we do this by modeling the duration length of the expansion and recession regimes as draws from a fat tailed distribution with realized durations that are high in variability and occasionally extreme in value empirically we find that the tail indices for the length of us economic booms and busts correspond with the long memory parameter estimates of diebold and rudebusch 1989 long memory and persistence in aggregate output journal of monetary economics 24 189 209 and sowell 1992a modeling long run behavior with the fractional arima model journal of monetary economics 29 277 302 for real us output estimates of our extended regime switching model produce better short and long run forecasts of output in comparison to forecasts with a fractionally integrated model furthermore our estimated regime switching model finds us expansions to be fragile during their infancy but become more and more likely to continue after surviving the first seven quarters

extracting nonlinear signals from several economic indicators summary we develop a twofold analysis of how the information provided by several economic indicators can be used in markov switching dynamic factor models to identify the business cycle turning points first we compare the performance of a fully nonlinear multivariate specification one step approach with the shortcut of using a linear factor model to obtain a coincident indicator which is then used to compute the markov switching probabilities two step approach second we examine the role of increasing the number of indicators our results suggest that one step is generally preferred to two steps especially in the vicinity of turning points although its gains diminish as the quality of the indicators increases additionally we also obtain decreasing returns of adding more indicators with similar signal to noise ratios using the four constituent series of the stock watson coincident index we illustrate these results for us data copyright 2014 john wiley sons ltd

a bayesian approach to model changes in volatility in the mexican stock exchange index we model the changes in volatility in the mexican stock exchange index using a bayesian approach we study the time series with a wide set of models characterized by a markov switching heterogeneit

global prediction of recessions abstract we present evidence that global vectorautoregressive gvar models produce more accurate recession forecasts than country specific time series models in a bayesian framework this result holds for most countries and forecast horizons as well as for several country groups

rational inattention in uncertain business cycles the paper proposes endogenous information choice as a channel through which uncertainty affects price dynamics i consider a rational inattention model with volatility uncertainty and endogenous information processing capability according to the model firms learning and optimal attention exhibits inertia and asymmetry in response to volatility changes firms choose to process more information when uncertainty rises especially about aggregate conditions and their pricing behavior changes accordingly using a markov switching factor augmented vector autoregression ms favar the paper also documents a significant positive correlation between volatility and firms responsiveness to macro and microlevel shocks consistent with model predictions

cooperative investments and the value of contracting recent articles have shown that contracts can support the efficient outcome for bilateral trade even in the face of specific investments and incomplete contracting these studies typically considered selfish investments that benefit the investor e g the seller s investment reduces her production costs the authors find very different results for cooperative investments that directly benefit the investor s partner e g the seller s investment improves the buyer s value of the good most importantly if committing not to renegotiate the contract is impossible then contracting has no value i e the parties cannot do better than to abandon contracting altogether in favor of ex post negotiation

nonlinear forecasting analysis using diffusion indexes an application to japan this paper extends the diffusion index di forecast approach of stock and watson 1998 2002 to the case of possibly nonlinear dynamic factor models when the number of series is large a two step procedure based onthe method of principal components is useful since it allows wide variety of nonlinearity in the factors the factors extracted from a large japanese data suggest some evidence of nonlinear structure furthermore both the linear and nonlinear di forecasts in japan outperform traditional time series forecasts while the linear di forecast in most cases performs as well as the nonlinear di forecast

business cycle turning points a new coincident index and tests of duration dependence based on a dynamic factor model with regime switching the synthesis of the dynamic factor model of stock and watson 1989 and the regime switching model of hamilton 1989 proposed by diebold and rudebusch 1996 potentially encompasses both features of the business cycle identified by burns and mitchell 1946 1 comovement among economic variables through the cycle and 2 nonlinearity in its evolution however maximum likelihood estimation has required approximation recent advances in multimove gibbs sampling methodology open the way to approximation free inference in such non gaussian nonlinear models this paper estimates the model for u s data and attempts to address three questions are both features of the business cycle empirically relevant might the implied new index of coincident indicators be a useful one in practice do the resulting estimates of regime switches show evidence of duration dependence the answers to all three would appear to be yes

model averaging in markov switching models predicting national recessions with regional data this paper introduces new weighting schemes for model averaging when one is interested in combining discrete forecasts from competing markov switching models in the empirical application we forecast u s business cycle turning points with state level employment data we find that forecasts obtained with our best combination scheme provide timely updates of u s recessions in that they outperform a notoriously difficult benchmark to beat the anxious index from the survey of professional forecasters for short term forecasts

a new coincident index of business cycles based on monthly and quarterly series maximum likelihood factor analysis of time series is possible even when some series are quarterly and others are monthly treating quarterly series as monthly series with missing observations and replacing them with artificial observations independent of the model parameters one can apply the kalman filter to a state space representation of a factor model and evaluate the likelihood function an application to quarterly real gdp and monthly coincident business cycle indicators gives a new coincident index of business cycles the new index is essentially the smoothed estimate of latent monthly real gdp and should improve upon the stock watson index

extracting a robust u s business cycle using a time varying multivariate model based bandpass filter we develop a flexible business cycle indicator that accounts for potential time variation in macroeconomic variables the coincident economic indicator is based on a multivariate trend cycle decomposition model and is constructed from a moderate set of us macroeconomic time series in particular we consider an unobserved components time series model with a common cycle that is shared across different time series but adjusted for phase shift and amplitude the extracted cycle can be interpreted as a model based bandpass filter and is designed to emphasize the business cycle frequencies that are of interest to applied researchers and policymakers stochastic volatility processes and mixture distributions for the irregular components and the common cycle disturbances enable us to account for the heteroskedasticity present in the data forecasting results are presented for a set of different specifications point forecasts from the preferred model indicate a future recession with the uncertainty over the business cycle growing quickly as the forecast horizon increases copyright 2010 john wiley sons ltd

the optimal allocation of prizes in contests we study a contest with multiple not necessarily equal prizes contestants have private information about an ability parameter that affects their costs of bidding the contestant with the highest bid wins the first prize the contestant with the second highest bid wins the second prize and so on until all the prizes are allocated all contestants incur their respective costs of bidding the contest s designer maximizes the expected sum of bids our main results are 1 we display bidding equlibria for any number of contestants having linear convex or concave cost functions and for any distribution of abilities 2 if the cost functions are linear or concave then no matter what the distribution of abilities is it is optimal for the designer to allocate the entire prize sum to a single first prize 3 we give a necessary and sufficient conditions ensuring that several prizes are optimal if contestants have a convex cost function

forecasting us recessions with macro factors dynamic factors estimated from panels of macroeconomic indicators are used to predict future recessions using probit models three factors are considered a bond and exchange rates factor a stock market factor and a real activity factor three results emerge first models that use only financial indicators exhibit a large deterioration in fit after 2005 second models that use factors yield better fit than models that use indicators directly out of sample forecasting exercises confirm these results for 3 6 and 12 month horizons using both ex post revised data and real time data third results show evidence that data revisions affect factors less than individual indicators

competing premarital investments this paper studies premarital parental investments in children s wealth where spousal wealth is a public good in marriage by investing in their children s wealth parents increase the wealth of their children and the quality of the spouses that their children can marry in large marriage markets the hedonic return to investment internalizes all the external benefits of premarital investment in wealth so that the competitive equilibrium is efficient marriage market competition also increases investments in small marriage markets relative to no competition but equilibrium investments are not efficient

the feedback effect in two sided markets with bilateral investments abstract agents in a finite two sided market are matched assortatively based on costly investments besides signaling privately known complementary types the investments also directly benefit the match partner the bilateral external benefits induce a complex feedback cycle that amplifies the agents signaling investments our main results quantify how the feedback effect depends on the numbers of competitors on both sides of the market this yields detailed insights into the equilibria of two sided matching contests with incomplete information in particular for markets of small or intermediate size it also allows us to shed some new light on the relationship between finite and continuum models of pre match investment

wavelet decomposition and regime shifts assessing the effects of crude oil shocks on stock market returns while there is a large body of empirical studies on the relationship between crude oil price changes and stock market returns they have failed to achieve a consensus on this subject in this paper we combine wavelet analysis and markov switching vector autoregressive ms var approach to explore the impact of the crude oil co shocks on the stock market returns for uk france and japan over the period from january 1989 to december 2007 our procedure involves the estimation of the extended ms var model in order to investigate the importance of the resultant wavelet filtering series after removing random components in determining the behavior of the stock market volatilities we show that co shocks do not affect the recession stock market phases except for japan however they significantly reduce moderate and or expansion stock market phases temporarily moreover this negative relationship appears to be more pronounced during the pre 1999 period the empirical findings will prove extremely useful to investors who need to understand the exact effect of international oil changes on certain stocks prices as well as for policy managers who need a more thorough evaluation about the efficiency of hedging policies affected by oil price changes

unobserved component time series models with markov switching heteroscedasticity changes in regime and the link between inflation rates and inflation uncertainty in this article i first extend the standard unobserved component time series model to include hamilton s markov switching heteroscedasticity this will provide an alternative to the unobserved component model with autoregressive conditional heteroscedasticity as developed by harvey ruiz and sentana and by evans and wachtel i then apply a generalized version of the model to investigate the link between inflation and its uncertainty u s data gross national product deflator 1958 1 1990 4 i assume that inflation consists of a stochastic trend random walk component and a stationary autoregressive component following ball and cecchetti and a four state model of u s inflation rate is specified by incorporating regime shifts in both mean and variance structures i analyze the interaction of mean and variance over long and short horizons the empirical results show that inflation is costly because higher inflation is associated with higher long run uncertainty

investment and competitive matching we study markets in which agents first make investments and are then matched into potentially productive partnerships equilibrium investments and the equilibrium matching will be efficient if agents can simultaneously negotiate investments and matches but we focus on markets in which agents must first sink their investments before matching additional equilibria may arise in this sunk investment setting even though our matching market is competitive these equilibria exhibit inefficiencies that we can interpret as coordination failures all allocations satisfying a constrained efficiency property are equilibria and the converse holds if preferences satisfy a separability condition we identify sufficient conditions most notably quasiconcave utilities for the investments of matched agents to satisfy an exchange efficiency property as well as sufficient conditions most notably a single crossing property for agents to be matched positive assortatively with these conditions then forming the core of sufficient conditions for the efficiency of equilibrium allocations

business cycle duration dependence reconsidered sichel estimated a weibull hazard model using the national bureau of economic research business cycle chronology and found evidence of duration dependence only for prewar expansions and postwar contractions the article updates the postwar sample through the end of the most recent expansion and uses a generalized weibull model that provides much greater flexibility at the expense of one additional parameter this model finds evidence of duration dependence for all samples and is statistically superior to the conventional weibull model for all samples except postwar contractions

business cycle phases in u s states the u s aggregate business cycle is often characterized as a series of distinct recession and expansion phases we apply a regime switching model to state level coincident indices to characterize state business cycles in this way we find that states differ a great deal in the levels of growth that they experience in the two phases recession growth rates are related to industry mix whereas expansion growth rates are related to education and age composition further states differ significantly in the timing of switches between regimes indicating large differences in the extent to which state business cycle phases are in concord with those of the aggregate economy

time series decomposition and measurement of business cycles trends and growth cycles abstract a study of business cycles does not require trend estimation and elimination but a study of growth cycles does major cyclical slowdowns and speedups deserve to be analyzed but the needed time series decomposition presents difficult problems mainly because trends and cycles influence each other we compare cyclical movements in levels deviations from trend and smoothed growth rates for both the quarterly real gdp and the monthly u s coincident index using the phase average trend pat then we compare alternative trend estimates deterministic and stochastic linear and nonlinear and the corresponding series of deviations from these trends we discuss how the resulting estimates differ for u s growth cycles in the post world war ii period the results of pat show great similarity to the results obtained with the hodrick prescott local linear trend band pass filtering methods

the economic performance of cities a markov switching approach abstract this paper examines the determinants of employment growth in metro areas to obtain growth rates we use a markov switching model that separates a city s growth path into two distinct phases high and low each with its own growth rate the simple average growth rate over some period is therefore the weighted average of the high phase and low phase growth rates with the weight being the frequency of the two phases we estimate the effects of a variety of factors separately for the high phase and low phase growth rates growth in the high phase is related to both human capital and industry mix while growth in the low phase is related to industry mix only specifically the relative importance of manufacturing overall our results strongly reject the notion that city level characteristics influence employment growth equally across the phases of the business cycle

evidence of the duration dependence from the stock markets in the pacific rim economies this article investigates the duration dependent feature of five pacific rim economies the duration dependent markov switching model is employed to achieve this objective the savage dickey density ratio is also computed in support of the duration dependent markov switching model the possible bull and bear market dates for each stock market are also identified by the posterior probability from the empirical model it is unambiguous that japan south korea and hong kong are all characterized by duration dependence in a bear market but no duration dependence in a bull market in the case of taiwan and singapore the duration dependence feature holds for both the bear and bull markets

regime switching and monetary policy measurement this paper applies regime switching methods to the problem of measuring monetary policy policy preferences and structural factors are specified parametrically as independent markov processes interaction between the structural and preference parameters in the policy rule serves to identify the two processes the estimates uncover policy episodes that are initiated by switches to dove regimes shown to granger cause both nber recessions and the romer dates these episodes imply real effects of monetary policy that are smaller than those found in previous studies

an econometric characterization of business cycle dynamics with factor structure and regime switching a dynamic factor model with regime switching is proposed as an empirical characterization of business cycles the approach integrates the idea of comovements among macroeconomic variables and asymmetries of business cycle expansions and contractions the first is captured with an unobservable dynamic factor and the second by allowing the factor to switch regimes the model is estimated by maximizing its likelihood function and the empirical results indicate that the combination of these two features leads to a successful representation of the data relative to extant literature this holds for within and out of sample and for both revised and real time data copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

regime switching model of us crude oil and stock market prices 1859 to 2013 this paper examines the relationship between us crude oil and stock market prices using a markov switching vector error correction model and a monthly data set from 1859 to 2013 the sample covers the entire modern era of the petroleum industry which typically begins with the first drilled oil well in titusville pennsylvania in 1858 we estimate a two regime model that divides the sample into high and low volatility regimes based on the variance covariance matrix of the oil and stock prices we find that the high volatility regime more frequently exists prior to the great depression and after the 1973 oil price shock caused by the organization of petroleum exporting countries the low volatility regime occurs more frequently when the oil markets fell largely under the control of the major international oil companies from the end of the great depression to the first oil price shock in 1973 using the national bureau of economic research business cycle dates we also find that the high volatility regime more likely occurs when the economy experiences a recession

income inequality under soviet socia lism socialism according to its proponents has diverse virtues but not least is the notable degree of equity that it is seen as assuring in the assignment of claims to the community s income with the substantial replacement of private by public ownership of the means of production it is held a cardinal source of inequity in incomes under capitalism ceases at once to be operative under socialism the intimate relation between income and work done that prevails under the rival system supposedly will also give way soon or late to the alternative principle proclaimed long ago as the only equitable one of distributing the community s output simply according to need in the socialist world today as no one must be told incomes hardly conform to need anywhere the question remains though as to how far socialist countries may have progressed toward implementation of that norm that is a matter of interest even to those who do not subscribe to such an egalitarian principle what is essentially at issue however is the extent of income inequality in socialist countries and how such countries compare in that regard with the mixed economy countries of the west those are matters on which socialist countries have not always been especially forthright that is an interesting fact in itself but it necessarily obstructs accurate appraisal of income inequality even where relevant data on incomes are available their meaning is often obscured by complexities of prevailing commodity distribution arrangements pervasive imbalances in the retail market are the best known but not the only example of such complexities these difficulties are encountered in inquiring into comparative income inequality under socialism everywhere they seem especially pronounced however in the case of the chief country where that system prevails the ussr though is of particular interest as the country where

marriage as a rat race noisy premarital investments with assortative matching we study the efficiency of premarital investments when parents care about their child s marriage prospects in a large frictionless marriage market with nontransferable utility stochastic returns to investment ensure that equilibrium is unique we find that generically investments exceed the pareto efficient level unless the sexes are symmetric in all respects girls will invest more than boys if their quality shocks are less variable than shocks for boys or if they are the abundant sex the unique equilibrium in our continuum agent model is the limit of the equilibria of finite models as the number of agents tends to infinity

a nonparametric investigation of duration dependence in the american business cycle does the termination probability of a business expansion or contraction increase with age this question may be formally addressed by analyzing the nature of duration dependence in aggregate economic activity our null hypothesis is that there is no duration dependence which we test via intentionally nonparametric procedures we also argue that common notion of business cycle periodicity can be usefully interpreted in terms of whole cycle duration dependence we find some evidence for duration dependence in whole cycles and in prewar expansions but little evidence elsewhere

does competition solve the hold up problem in an environment in which heterogeneous buyers and sellers undertake ex ante investments the presence of market competition for matches provides incentives for investment but may leave inefficiencies namely hold up and coordination problems this paper shows using an explicitly non cooperative model that when matching is assortative and investments precede market competition buyers investments are constrained efficient while sellers marginally underinvest with respect to what would be constrained efficient however the overall extent of this inefficiency may be large multiple equilibria may arise one equilibrium is characterized by efficient matches but there can be additional equilibria with coordination failures

new index of coincident indicators a multivariate markov switching factor model approach abstract this paper extends the univariate markov switching unobserved component model to the multivariate markov switching factor model of coincident economic indicators an approximate ml method is developed to estimate the model the extracted markov switching factor may be interpreted as the coincident index and is comparable to the stock watson index which differs only by the markov switching component using four constituent series of the doc coincident index for the period january 1960 to june 1992 the proposed model generates recessionary and expansionary periods which are remarkably consistent with the nber chronology of the business cycles from the noisy monthly data this paper also finds that duration dependence does matter

the past present and future of macroeconomic forecasting he reports of the death of large scale macroeconomic forecasting models are not exaggerated but many observers interpret the failure of the early models as indicative of a bleak future for macroeconomic forecasting more generally such is not the case although the large scale macroeconomic forecasting models didn t live up to their original promise they nevertheless left a useful legacy of lasting contributions from which macroeconomic forecasting will continue to benefit they spurred the development of powerful identification and estimation theory computational and simulation techniques comprehensive machinereadable macroeconomic databases and much else moreover past failures do not necessarily imply a bleak future we learn from our mistakes just as macroeconomics has benefitted from rethinking since the 1970s so too will macroeconomic forecasting understanding the future of macroeconomic forecasting requires understanding the interplay between measurement and theory and the corresponding evolution of the nonstructural and structural approaches to forecasting nonstructural macroeconomic forecasting methods attempt to exploit the reduced form correlations in observed macroeconomic time series with little reliance on economic theory structural models in contrast view and interpret economic data through the lens of a particular economic theory structural econometric forecasting because it is based on explicit theory rises and falls with theory typically with a lag structural keynesian macroeconomic forecasting based on postulated systems of decision rules enjoyed a golden age in the 1950s and 1960s following the advances in keynesian theory in the 1930s and 1940s

optimal advertising of auctions we study a symmetric independent private values auction model where the revenue maximizing seller faces a cost cn of attracting n bidders to the auction if the distribution of valuations possesses an increasing failure rate ifr the seller overinvests in attracting bidders compared to the social optimum conversely if the distribution is dfr the seller underinvests compared to the social optimum if the distribution of valuations becomes more dispersed both a revenue and a welfare maximizing seller attract more bidders