evaluating forecasts from setar models of exchange rates we consider the forecasting performance of two setar exchange rate models proposed by krager and kugler j int money fin 12 1993 195 assuming that the models are good approximations to the data generating process we show that whether the non linearities inherent in the data can be exploited to forecast better than a random walk depends on both how forecast accuracy is assessed and on the state of nature evaluation based on traditional measures such as root mean squared forecast errors may mask the superiority of the non linear models generalized impulse response functions are also calculated as a means of portraying the asymmetric response to shocks implied by such models

long term and spillover effects of health shocks on employment and income abstract we use matching combined with difference in differences to identify the causal effects of sudden illness represented by acute hospitalizations on employment and income up to six years after the health shock using linked dutch hospital and tax register data an acute hospital admission lowers the employment probability by seven percentage points and results in a 5 percent loss of personal income two years after the shock there is no subsequent recovery in either employment or income there are large spillover effects household income falls by 50 percent more than the income of the disabled person

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

threshold nonlinearities in unemployment rates further evidence for the uk and g3 economies the paper appraises the in sample and out of sample adequacy of linear ar and nonlinear setar models of unemployment rates for germany japan the uk and the us tests are reported for the presence and specification of threshold nonlinearities setar model estimates limiting dynamic properties and residual diagnostics and out of sample forecasting performance in sample threshold non linearities are confirmed to be strongly present for the uk us and germany and more marginally so for japan out of sample excepting japan setar models provide superior onestep ahead forecast on rmse grounds most notably for the us final tests indicate that these models exhibit predictive accuracy in the sense of parameter and residual variance stability implying the potential for exploitation of such nonlinearity in official forecasting

a floor and ceiling model of us output abstract building on previous nonlinear time series models we further examine the form of nonlinearity in us output we develop a model of us output that allows for floor and ceiling effects to alter the dynamics of output growth the model estimated on post korean war quarterly data displays features similar to nonlinear trade cycle models of the 1940s and 1950s thus as predicted by many of the earlier theoretical models our empirical results suggest that the turning points of the business cycle provide new initial conditions for the ensuing growth process we also find important asymmetries in the responses of output to positive and negative shocks this history and shock dependence property is not present in linear or approximately linear models of the type that arise in the standard implementations of real business cycle theory

non linearities in foreign exchange markets a different perspective abstract in this paper we estimate self exciting threshold autoregression setar models for five currencies using weekly data over the last ten years the study is motivated by the conjecture that the system of managed floating which prevailed in the 1980s leads to different behavior of moderate and large exchange rate changes in all cases considered statistically significant threshold effects could be found in most cases these are in line with the a priori expected pattern however the application of the brock dechert scheinkman test to the setar residuals and an analysis of stability over time point to some misspecifications of the models similar results are obtained when the standard garch model is applied to our data jel f31

business cycle non linearities in uk consumption and production this paper develops non linear smooth transition autoregressive star models with two additive smooth transition components to capture the business cycle characteristics of uk real consumers expenditure and industrial production the results indicate consumption has essentially two business cycle regimes recession and expansion industrial production however is characterized by the three regimes of recession normal growth and high growth the transitions describing recovery from recession are very similar for the two variables stochastic simulations illustrate the dynamic responses of these models and emphasize that they are locally linear our results also indicate that the two transition star models have some forecast advantages over other specifications for periods of contraction copyright 2000 john wiley sons ltd

a nonlinear approach to us gnp a univariate nonlinear model is estimated for us gnp that on many criteria outperforms standard linear models the estimated model is of the threshold autoregressive type and contains evidence of asymmetric effects of shocks over the business cycle in particular the nonlinear model suggests that the post 1945 us economy is significantly more stable than the pre 1945 us economy

evaluating predictions of change this article applies a technique developed by robert c merton 1981 and roy d henriksson and robert c merton 1981 for evaluating the market timing of financial managers to macroeconomic predictions of change this methodology may be used to determine whether the predictions may be of value to the user as an illustration the methodology is applied to a set of real gross national product forecasts copyright 1990 by the university of chicago

the effect of dynamic competition on price cost margins this paper analyses the intertemporal adjustment process of price cost margins at the four digit standard industrial classification sic industry level our intial analysis shows the assumption that the adjustment process is consistent over all industries is inappropriate while the assumption that the adjustment process is consistent over two digit industries is supported in approximately 31 of the sample industries we proceed to analyse industry specific adjustment parameters and find that 50 of the sample are compatible with a decay of 90 of the supranormal return with four years and 85 of the sample exhibit margins that decay in approximately 10 years further analysis allows us draw some weak conclusions on the determinants of the adjustment parameter we find a change in cocentration high imports a mature market and low research and development expenditures contribute to slightly lower adjustment coefficients and a faster decay of supranormal profits finally the modelling of the adjustment

a setar model for canadian gdp non linearities and forecast comparisons this paper investigates the forecasting performance of the non linear time series setar model by using canadian gdp data from 1965 to 2000 besides the within sample fit the forecasting performance of a standard linear arima model for the same sample has also been generated for comparative purposes two forecasting methods one step ahead and multi step ahead forecasting are compared for each type of model

assessing the credibility of a target zone evidence from the ems this paper provides some new evidence on the credibility of the exchange rate mechanism erm of the european monetary system ems the study differs from previous research in the literature in three main respects first the main contribution is the use of several credibility indicators some of which have never been applied before to all of the currencies under study this allows one to strengthen the results obtained in this paper second a longer period than that of previous studies is analysed covering the complete ems history third a comparison has been made of the prediction qualities of the different indicators in order to explore their ability to capture the main erm events realignments changes in the fluctuations bands and speculative pressures fourth the indicators are applied to the experience of the new modified erm linking the currencies of non euro area member states to the euro showing the relevance of this approach in the near future with the enlargement of the european union

minimum wage policy and employment effects evidence from brazil the international literature on minimum wages greatly lacks empirical evidence for latin america in brazil not only are minimum wage increases large and frequent but they also have been used as both a social policy and an anti inflationary policy this paper estimates the effects of the minimum wage on wages and employment using panel data techniques and brazilian monthly household data from 1982 to 2000 a number of conceptual and identification questions are discussed for example the paper summarizes various strategies on how best to measure the effect of a constant national minimum wage presenting a menu of minimum wage variables that are then used to estimate wage and employment effects the paper also uses an employment decomposition that separately estimates the effect of the minimum wage on hours per worker and on the number of jobs robust results indicate that an increase in the minimum wage strongly compresses the wages distribution with small adverse effects on employment

the convergence of profits in the long run inter firm and inter industry comparisons this paper considers the extent to which the short run dynamic behavior and long run equilibrium levels of profitability differ among firms within the same industry movements in profits are modeled in terms of firm specific deviations from average industry profits and industry specific deviations from economy wide average returns applied to a sample of 217 large u k firms 1951 77 the results suggest that considerable heterogeneities exist within most industries that is most firms profitability experience differs considerably from those of their closest rivals copyright 1987 by blackwell publishing ltd

forecasting business and consumer surveys indicators a time series models competition the objective of this article is to compare different time series methods for the short run forecasting of business and consumer survey indicators we consider all available data taken from the business and consumer survey indicators for the euro area between 1985 and 2002 the main results of the forecast competition are offered not only for raw data but we also consider the effects of seasonality and removing outliers on forecast accuracy in most cases the univariate autoregressions were not outperformed by the other methods as for the effect of seasonal adjustment methods and the use of data from which outliers have been removed we obtain that the use of raw data has little effect on forecast accuracy the forecasting performance of qualitative indicators is important since enlarging the observed time series of these indicators with forecast intervals may help in interpreting and assessing the implications of the current situation and can be used as an input in quantitative forecast models

a nonlinear stochastic rational expectations model of exchange rates abstract this paper constructs an example of a nonlinear stochastic rational expectations exchange rate with an explicit solution which is consistent with nonlinearities in short term movements in exchange rates the model consists of risk neutral agents who know the intervention rule of the central bank the resulting exchange rate switches between two linear stochastic processes one when intervention is present and another when intervention is absent nonlinearity enters through the probability of intervention which is time varying and depends on past outcomes this model is consistent with the empirical observations that the rate of change of the exchange rate has little autocorrelation but it exhibits strong nonlinear dependence and its variance changes over time jel j31 g15

business cycles and the relationship between concentration and price cost margins using a newly constructed panel data base we examine changes in price cost margins in 284 manufacturing industries between 1958 and 1981 a key finding is a dramatic narrowing of the spread between the margins of concentrated and unconcentrated industries over this period we provide evidence that this narrowing is a result of the greater sensitivity of price cost margins in more concentrated industries to demand fluctuations this finding is robust to the inclusion of other industry variables and to measures of import competition the results indicate that cross sectional estimates of the concentration margins relationship are likely to be both biased and misleading

characterizing nonlinearities in business cycles using smooth transition autoregressive models during the past few years investigators have found evidence indicating that various time series representing business cycles such as production and unemployment may be nonlinear in this paper it is assumed that if the time series is nonlinear then it can be adequately described by a smooth transition autoregressive star model the paper describes the application of these models to quarterly logarithmic production indices for 13 countries and europe tests reject linearity for most of these series and estimated star models indicate that the nonlinearity is needed mainly to describe the responses of production to large negative shocks such as oil price shocks

do recessions permanently change output abstract this paper examines whether negative innovations to gnp are more or less persistent than positive innovations we find that once we allow for the impulse response of gnp to be asymmetric negative innovations to gnp are observed to be much less persistent than positive ones in particular the effect of a recession on the forecast of output is found to be negligible after only eight to twelve quarters while the effect of a positive shock is estimated to be persistent and amplified over time our results may therefore help reconcile two antagonistic views about the nature of business cycle fluctuations

modelling business cycle movements in the uk economy this paper models the phases of the uk business cycle using gdp data with a time varying transition probabilities tvtp markov switching regime model and exogenous leading indicator variables single indicators in linear models are compared with the tvtp framework with logistic and exponential functions used in the latter the markov switching models capture the major recessions of the sample but the use of leading indicators through the tvtp framework can improve this regime recognition finally a forecast comparison shows that the tvtp models perform relatively well in predicting during the 1990s particularly when nominal interest rates are used to generate the regime switching probabilities

a monte carlo study of the forecasting performance of empirical setar models in this paper we investigate the multi period forecast performance of a number of empirical selfexciting threshold autoregressive setar models that have been proposed in the literature for modelling exchange rates and gnp amongst other variables we take each of the empirical setar models in turn as the dgp to ensure that the non linearity characterises the future and compare the forecast performance of setar and linear autoregressive models on a number of quantitative and qualitative criteria our results indicate that non linear models have an edge in certain states of nature but not in others and that this can be highlighted by evaluating forecasts conditional upon the regime