nowcasting sales growth of manufacturing companies in india abstractthe performance of private corporate sector is used as an important demand indicator for monetary policy making as these data are received with a lag assessing and monitoring of corporate sales on a real time basis poses a significant challenge to policy makers in india in this context this article attempts to nowcast quarterly sales growth of indian manufacturing companies and gdp growth of india using dynamic factor modelling framework a multiple level framework through turning point analysis and elastic net structure is used to overcome the overfitting problem during variable selection empirical results show improvement in forecast accuracy for one quarter ahead nowcast using 3 factor and 4 factor models over the benchmark model however absolute dominance of 3 factor models over 4 factor models was not established as such the article has proposed a forecast combination technique to nowcast sales growth of manufacturing companies in india

macroeconomic forecasting in the euro area country specific versus area wide information abstract this paper compares several time series methods for short run forecasting of euro wide inflation and real activity using data from 1982 to 1997 forecasts are constructed from univariate autoregressions vector autoregressions single equation models that include euro wide and us aggregates and large model methods in which forecasts are based on estimates of common dynamic factors aggregate euro wide forecasts are constructed from models that utilize only aggregate euro wide variables and by aggregating country specific models the results suggest that forecasts constructed by aggregating the country specific models are more accurate than forecasts constructed using the aggregate data

exploiting the monthly data flow in structural forecasting a quarterly stochastic general equilibrium dsge model is combined with a now casting model designed to read timely monthly information as it becomes available this implies 1 mapping the structural quarterly dsge with a monthly version that maintains the same economic restrictions 2 augmenting the model with a richer data set and 3 updating the estimates of the dsge s structural shocks in real time following the publication calendar of the data our empirical results show that our methodology enhances the predictive accuracy in now casting an analysis of the great recession also shows that our framework would have helped tracing the dsge s structural shocks in real time obtaining for example a more timely account of the 2008 contraction

a model of product line design and introduction sequence with reservation utility abstract cannibalization is a major concern for a firm when designing a product line in addition external options from outside the firm s product line may also play a significant role in this paper we investigate the impact of external options represented by reservation utility on product line design and introduction sequence we find that a heterogeneous reservation utility defines the relative attractiveness of segments and corresponding product line b reservation utility makes it more favorable to introduce products sequentially rather than simultaneously c aggregating segments is an effective way to mitigate cannibalization when it becomes too difficult to manage with different values of reservation utility across multiple segments and d introducing products in a non monotone order of quality can improve profit from simultaneous introduction when the value of reservation utility of a middle segment is particularly high

commonality in product design cost saving valuation change and cannibalization abstract offering a variety of products is important for a firm to attract different consumer segments however high product variety increases production and distribution costs modular product design and parts commonality are approaches used to counter this trend in cost and still offer a variety of products this paper develops a model to examine when modular products should be introduced and how much modularity to offer the model looks at a market consisting of a high segment and a low segment customers choose the product that maximizes their surplus which is defined as the product s utility minus its price presence of commonality affects the utility of a product greater commonality decreases production cost but makes the products more indistinguishable from one another this makes the product more desirable for the low segment but less desirable for the high segment the firm s objective is to design the products and set the prices so as to maximize its profit

nowcasting the real time informational content of macroeconomic data abstract a formal method is developed for evaluating the marginal impact that intra monthly data releases have on current quarter forecasts nowcasts of real gross domestic product gdp growth the method can track the real time flow of the type of information monitored by central banks because it can handle large data sets with staggered data release dates each time new data are released the nowcasts are updated on the basis of progressively larger data sets that reflecting the unsynchronized data release dates have a jagged edge across the most recent months

forecasting the world economy in the short term 1433 audrone jakaitiene and stephane dees forecasting the world economy is a difficult task given the complex interrelationships within and across countries this paper proposes a number of approaches to forecast short term changes in selected world economic variables and aims first at ranking various forecasting methods in terms of forecast accuracy and second at checking whether methods forecasting directly aggregate variables direct approaches outperform methods based on the aggregation of country specific forecasts bottom up approaches overall all methods perform better than a simple benchmark for short horizons up to 3 months ahead among the forecasting approaches used factor models appear to perform the best moreover direct approaches outperform bottom up ones for real variables but not for prices finally when country specific forecasts are adjusted to match direct forecasts at the aggregate levels top down approaches the forecast accuracy is neither improved nor deteriorated i e top down and bottom up approaches are broadly equivalent in terms of country specific forecast accuracy

optimal temporal product introduction strategies under valuation changes and learning consider a firm facing two consumer segments with differing valuations for quality the demand is stationary and known and consumers make repeat purchase over two time periods however once a premium product is introduced the valuations of the consumers change in the next period the firm derives a cost savings due to learning effect in the second period the magnitude of which depends on the sales volume in the first period under such a situation should a firm introduce a premium product before a basic product or the vice versa should it introduce two products simultaneously when should a firm expand or consolidate its product line what is the optimal product introduction strategy for a firm using a two period stylized model we seek to answer these questions we characterize the optimal product introduction strategy for the firm we describe three easily calculable parameters that govern the optimal choice of the firm the conditions under which a firm should expand or consolidate its product line are discussed we study the effects of cost savings and customer valuation changes we show that the dominated product strategies in absence of these effects can be a part of an optimal product strategy of a firm under valuation changes and cost savings the managerial implications of the model are discussed

mixed frequency var models with markov switching dynamics this paper extends the markov switching vector autoregressive models to accommodate both the typical lack of synchronicity that characterizes the real time daily flow of macroeconomic information and economic indicators sampled at different frequencies the results of the empirical application suggest that the model is able to capture the features of the nber business cycle chronology very accurately

real time macroeconomic monitoring real activity inflation and interactions the authors sketch a framework for monitoring macroeconomic activity in real time and push it in new directions in particular they focus not only on real activity which has received most attention to date but also on inflation and its interaction with real activity as for the recent recession the authors find that 1 it likely ended around july 2009 2 its most extreme aspects concern a real activity decline that was unusually long but less unusually deep and an inflation decline that was unusually deep but brief and 3 its real activity and inflation interactions were strongly positive consistent with an adverse demand shock this abstract was borrowed from another version of this item

forecasting the gdp of a small open developing economy an application of favar models gdp forecasting remains a challenge for a small open developing economy faced with insufficient and low frequency data central bank forecasters cannot project gdp reliably for the purpose of mone

short term gdp forecasting with a mixed frequency dynamic factor model with stochastic volatility in this article we develop a mixed frequency dynamic factor model in which the disturbances of both the latent common factor and of the idiosyncratic components have time varying stochastic volatilities we use the model to investigate business cycle dynamics in the euro area and present three sets of empirical results first we evaluate the impact of macroeconomic releases on point and density forecast accuracy and on the width of forecast intervals second we show how our setup allows to make a probabilistic assessment of the contribution of releases to forecast revisions third we examine point and density out of sample forecast accuracy we find that introducing stochastic volatility in the model contributes to an improvement in both point and density forecast accuracy supplementary materials for this article are available online

gdp nowcasting application and constraints in a small open developing economy despite data limitations an attempt is made to find out if a gdp nowcasting model can provide reliable forecasts for a small open economy two competing bayesian vector autoregressive models are tested rigorously to obtain the optimal model by minimizing in sample forecasting errors the main finding of this study is that gdp nowcasting can produce reliable results for a small open economy despite the unavailability of sufficient data sets and the lack of high frequency indicators

predictability of output growth and inflation a multi horizon survey approach we develop an unobserved components approach to study surveys of forecasts containing multiple forecast horizons under the assumption that forecasters optimally update their beliefs about past current and future state variables as new information arrives we use our model to extract information on the degree of predictability of the state variable and the importance of measurement errors in the observables empirical estimates of the model are obtained using survey forecasts of annual gdp growth and inflation in the united states with forecast horizons ranging from 1 to 24 months and the model is found to closely match the joint realization of forecast errors at different horizons our empirical results suggest that professional forecasters face severe measurement error problems for gdp growth in real time while this is much less of a problem for inflation moreover inflation exhibits greater persistence and thus is predictable at longer horizons than gdp growth and the persistent component of bot

u s monetary policy surprises identification with shifts and rotations in the term structure we develop a model to extract measures of monetary policy surprises from the maturity structure of the yield curve the model endogenously allows for the fact that the yield curve may either shift or rotate in response to monetary policy shocks a latent factor model approach with identification through heteroskedasticity harnesses the term structure to extract monetary policy shocks the approach offers informational advantages over event studies results from the u s term structure from 1994 strongly support the hypothesis that differing term structure responses are reactions to different types of monetary policy shock rather than differing reactions to the same policy shock

estimating time variation in measurement error from data revisions an application to backcasting and forecasting in dynamic models over time economic statistics are refined this implies that data measuring recent economic events are typically less reliable than older data such time variation in measurement error affects optimal forecasts measurement error and its time variation are of course unobserved our contribution is to show how estimates of these can be recovered from the variance of revisions to data using a behavioural model of the statistics agency we illustrate the gains in forecasting performance from exploiting these estimates using a real time dataset on uk aggregate expenditure data copyright 2009 john wiley sons ltd

automated earnings forecasts beat analysts or combine and conquer prior studies attribute analysts forecast superiority over time series forecasting models to their access to a large set of firm industry and macroeconomic information an information advantage which they use to update their forecasts on a daily weekly or monthly basis a timing advantage this study leverages recently developed mixed data sampling midas regression methods to synthesize a broad spectrum of high frequency data to construct forecasts of firm level earnings we compare the accuracy of these forecasts to those of analysts at short horizons of one quarter or less we find that our midas forecasts are more accurate and have forecast errors that are smaller than analysts when forecast dispersion is high and when the firm size is smaller in addition we find that combining our midas forecasts with analysts forecasts systematically outperforms analysts alone which indicates that our midas models provide information orthogonal to analysts our results provide preliminary support for th

forecasting oil prices high frequency financial data are indeed useful abstract the paper examines the importance of combining high frequency financial information along with the oil market fundamentals in order to gain incremental forecasting accuracy for oil prices inspired by french et al 1987 and bollerslev et al 1988 who maintain that future asset returns are also influenced by past volatility we use daily volatilities and returns from financial and commodity markets to generate real out of sample forecasts for the monthly oil futures prices our results convincingly show that although the oil market fundamentals are useful for long run forecasting horizons the combination of the latter with high frequency financial data significantly improve oil price forecasts by reducing the rmse of the no change forecast by approximately 68 results are even more impressive during the oil price collapse period of 2014 15 these findings suggest that we cannot ignore the information extracted from the financial markets when forecasting oil prices our results are both statistically and economically significant as suggested by several robustness tests

why do forecasters disagree lessons from the term structure of cross sectional dispersion abstract key sources of disagreement among economic forecasters are identified by using data on cross sectional dispersion in forecasters long and short run predictions of macroeconomic variables dispersion among forecasters is highest at long horizons where private information is of limited value and lower at short forecast horizons moreover differences in views persist through time such differences in opinion cannot be explained by differences in information sets our results indicate they stem from heterogeneity in priors or models differences in opinion move countercyclically with heterogeneity being strongest during recessions where forecasters appear to place greater weight on their prior beliefs

facts and challenges from the great recession for forecasting and macroeconomic modeling this paper provides a survey of business cycle facts updated to take account of recent data emphasis is given to the great recession which was unlike most other postwar recessions in the united states in being driven by deleveraging and financial market factors we document how recessions with financial market origins are different from those driven by supply or monetary policy shocks this helps explain why economic models and predictors that work well at some times do poorly at other times we discuss challenges for forecasters and empirical researchers in light of the updated business cycle facts

words are the new numbers a newsy coincident index of the business cycle i construct a daily business cycle index based on quarterly gdp growth and textual information contained in a daily business newspaper the newspaper data are decomposed into time series representi

the perversity of preferences gsp and developing country trade policies 1976 2000 industrial countries maintain special tariff preferences namely the generalized system of preferences gsp for imports from developing countries critics have highlighted the underachieving nature of such preferences but developing countries continue to place the gsp at the heart of their agenda in multilateral negotiations what effect do such preferences have on a recipient s own trade policies the authors develop and test a simple theoretical model of a small country s trade policy choice using a dataset of 154 developing countries from 1976 through 2000 they find that countries removed from the gsp adopt more liberal trade policies than those remaining eligible the results corrected for endogeneity and robust to numerous alternative measures of trade policy suggest that developing countries may be best served by full integration into the reciprocity based world trade regime rather than continued gsp style special preferences

have standard vars remained stable since the crisis small or medium scale vars are commonly used in applied macroeconomics for forecasting and evaluating the shock transmission mechanism this requires the var parameters to be stable over the evaluation and forecast sample or to explicitly consider parameter time variation the earlier literature focused on whether there were sizable parameter changes in the early 1980s in either the conditional mean or variance parameters and in the subsequent period till the beginning of the new century in this paper we conduct a similar analysis but focus on the effects of the recent crisis using a range of techniques we provide substantial evidence against parameter stability the evolution of the unemployment rate seems particularly different relative to its past behavior we then discuss and evaluate alternative methods to handle parameter instability in a forecasting context while none of the methods clearly emerges as best some techniques turn out to be useful to improve the forecasting performance

the yield spread puzzle and the information content of spf forecasts while the yield spread has long been recognized as a good predictor of recessions it seems to have been largely overlooked by professional forecasters we examine this puzzle established by rudebusch and williams 2009 in a data rich environment including not just the yield spread but many other predictors as well we confirm the puzzle in this context by examining the contributions of both the spf forecasts and the yield spread in predicting recessions and by examining the information content of spf forecasts directly furthermore we take the first step towards a possible resolution of this puzzle by recognizing the heterogeneity across professional forecasters

the optimal level of monetary aggregation in this paper i have three objectives 1 to describe the aggregation theoretic procedure for selecting the optimal monetary aggregates 2 to survey the available empirical evidence for information on the optimal aggregates and 3 to describe the procedures that should be followed to complete a redefinition of the monetary aggregates although all of the federal reserve board s current official aggregates are rejected as targets some newer aggregates are found to be substantially preferable to the official aggregates the board s staff recently completed the official redefinition of its monetary aggregates in a manner largely unrelated to aggregation and index number theory my own research in recent years has sought to remedy that shortcoming except for monetary aggregates most of the data provided by governmental agencies are constructed in accordance with aggregation and index number theory since aggregation theory can be applied to monetary aggregation 1 i constructed new monetary aggregates that are consistent with the economic theory 2 recently the empiri

trade benefits under the eec generalized system of preferences the purpose of the paper is to test for the existence of a statistically significant effect of the eec generalized system of preferences on actual trade flows between developing countries and the eec using a gravity type model we estimate the gross trade creation effect of the eec generalized system of preferences on the eec imports from 10 major developing countries estimation on a yearly basis for the period 1967 1978 indicates the presence of a statistically significant effect it would appear that gross trade creation amounted to about s2 billion for these 10 countries in 1978 in addition to these calculations the paper reviews the eec generalized system of preferences in detail and offers comments on its future impact on exports from developing countries

the optimal pace of product updates some firms e g intel and medtronics use a time pacing strategy for product development pd introducing new generations at regular intervals if the firm adopts a fast pace introducing frequently it prematurely cannibalizes its old generation incurring high development costs while if it has a slow pace it fails to capitalize on customer willingness to pay for improved technology we develop a model to gain insight into which factors drive the pace we consider pd cost the diffusion rate coefficients of innovation and imitation the rate of margin decline and the degree to which a new generation stimulates market growth we find that a faster pace is generally associated with faster diffusion a higher market growth rate and faster margin decay not so intuitively we find that relatively minor differences in the development cost function can significantly impact the pace

combining judgment and models this paper proposes a parsimonious and model consistent method for combining forecasts generated by structural microfounded models and judgmental forecasts the method delivers along several dimensions first it improves the forecasting performance of the model second it allows interpreting the judgmental forecasts through the lens of the model finally it provides a framework to assess the informational content of the judgmental forecasters i illustrate the proposed methodology with a real time forecasting exercise using a simple neo keynesian dynamic stochastic general equilibrium model and the survey of professional forecasters 2010 the ohio state university

are daily financial data useful for forecasting gdp evidence from mexico this article evaluates the use of financial data sampled at high frequencies to improve short term forecasts of quarterly gdp for mexico the model uses both quarterly and daily sampling frequencies while remaining parsimonious in particular the mixed data sampling midas regression model is employed to deal with the multi frequency problem to preserve parsimony factor analysis and forecast combination techniques are used to summarize the information contained in a data set containing 392 daily financial series our findings suggest that the midas model incorporating daily financial data leads to improvements in quarterly forecasts of gdp growth over traditional models that either rely only on quarterly macroeconomic data or average daily frequency data the evidence suggests that this methodology improves the forecasts for the mexican gdp notwithstanding its higher volatility relative to that of developed countries furthermore we explore the ability of the midas model to provide forecast updates for gdp growth nowcasting

effects of economic integration in industrial countries on asean and the asian nies abstract this paper assesses the effect of the proposed north american free trade area the second enlargement of the european community ec and ec 1992 on association of southeast asian nations asean and south korea by matching the commodities exported by asean or south korea to an integrating market such as the united states with those exported to the same market from internal sources such as canada it identifies the industries that would bear the brunt of the discrimination total trade diversion is estimated as a terms of trade effect at 4 of asean exports and 5 of south korean exports to north america and 8 and 5 of their respective exports to the ec ec 1992 is expected to have further discriminatory influences the effect of integration on direct foreign investment in asean and south korea is also evaluated

the learning curve and pricing in the chemical processing industries data on 37 chemical products are used to test a number of hypotheses about the learning curve and industrial price behavior the results document a strong and consistent learning effect learning is found to be a function of cumulated industry output and cumulated investment rather than calendar time standard economies of scale appear significant but small in magnitude relative to the learning effect variations in the slope of the learning curve are linked to differences in r d expenditures and capital intensity market concentration is found to be a strong influence on price flexibility and the timing of learningrelated price changes

monetary policy in a data rich environment abstract most empirical analyses of monetary policy have been confined to frameworks in which the federal reserve is implicitly assumed to exploit only a limited amount of information despite the fact that the fed actively monitors literally thousands of economic time series this article explores the feasibility of incorporating richer information sets into the analysis both positive and normative of fed policymaking we employ a factor model approach developed by stock j h watson m w diffusion indices journal of business economic statistics 2002 20 2 147 forecasting inflation 1999 journal of monetary economics 44 2 293 that permits the systematic information in large data sets to be summarized by relatively few estimated factors with this framework we reconfirm stock and watson s result that the use of large data sets can improve forecast accuracy and we show that this result does not seem to depend on the use of finally revised as opposed to real time data we estimate policy reaction functions for the fed that take into account its data rich environment and provide a test of the hypothesis that fed actions are explained solely by its forecasts of inflation and real activity finally we explore the possibility of developing an expert system that could aggregate diverse information and provide benchmark policy settings

trade and welfare effects of the european schemes of the generalized system of preferences through the last two rounds of multilateral tariff negotiations the kennedy round and the tokyo round discussions have been dominated by the interests of the three major trading blocs the united states the european economic community eec and japan all three groups have sought to exempt certain domestic industries from the negotiations the eec and japan have vigorously defended their agricultural sectors while the united states and other industrialized countries have protected the domestic textile and clothing industries consequently the products of greatest immediate interest to the less developed countries ldcs have not been the object of significant reductions in tariffs or nontariff barriers ntbs however the ldcs have not been excluded completely most of the industrialized countries have substituted a scheme of sub most

product development decisions a review of the literature this paper is a review of research in product development which we define as the transformation of a market opportunity into a product available for sale our review is broad encompassing work in the academic fields of marketing operations management and engineering design the value of this breadth is in conveying the shape of the entire research landscape we focus on product development projects within a single firm we also devote our attention to the development of physical goods although much of the work we describe applies to products of all kinds we look inside the black box of product development at the fundamentaldecisions that are made by intention or default in doing so we adopt the perspective of product development as a deliberate business process involving hundreds of decisions many of which can be usefully supported by knowledge and tools we contrast this approach to prior reviews of the literature which tend to examine the importance of environmental and contextual variables such as market growth rate the competitive environment or the level of top management support

real time forecasting with a mixed frequency var this article develops a vector autoregression var for time series which are observed at mixed frequencies quarterly and monthly the model is cast in state space form and estimated with bayesian methods under a minnesota style prior we show how to evaluate the marginal data density to implement a data driven hyperparameter selection using a real time dataset we evaluate forecasts from the mixed frequency var and compare them to standard quarterly frequency var and to forecasts from midas regressions we document the extent to which information that becomes available within the quarter improves the forecasts in real time this article has online supplementary materials

the effects of sensitization and habituation in durable goods markets abstract we develop a model to study the impact of changes in price sensitivity on the firm as it introduces multiple generations of a durable product where unit costs are a convex function of quality we incorporate the psychological processes of sensitization and habituation into a model of discretionary purchasing of replacement products motivated by past experience when price sensitivity decreases with each purchase sensitization the myopic firm offers a higher quality product at a much higher price with each generation when price sensitivity increases with each purchase habituation the myopic firm engages in price skimming when sensitization is followed by habituation the myopic firm eventually provides higher quality than the market is willing to pay for leading to a steep drop off in sales and profits the actions of the forward looking firm depend on the discount rate a firm with a low discount rate builds its customer base before offering a higher quality and higher priced product in contrast a firm with a high discount rate quickly increases price and quality following the same path to falling profits of the myopic firm these results provide insight into the firm and consumer behaviors underlying the phenomenon of performance oversupply identified in the innovation literature

divisia monetary aggregates and us gdp nowcasting this article nowcasts us quarterly real gdp growth rate with dynamic factor model dfm using divisia monetary aggregate index divisia m1 m2 m3 and exploits information from a large unbalanced

financial conditions indexes for the united states and euro area abstract financial conditions indexes are developed for the united states and euro area using a wide range of financial indicators and a dynamic factor model the financial conditions indexes are shown to be useful for forecasting economic activity and have good revision properties variants of the indexes that allow for cross economy effects reveal very strong financial linkages across the united states and euro area

trade preferences for developing countries a survey of results empirical studies of the trade and development effects of the major preferential trading schemes between the industrialised countries and the developing countries are surveyed most studies find the agreements to be trade creating improving welfare for the donor though general equilibrium analysis indicates that terms of trade deterioration offsets efficiency gains there is some evidence that trade preferences stimulate ldc exports of preferred products but total exports are not significantly affected due to limited product coverage the existing literature does not provide evidence on the degree of infant industry protection or on economic diversification of the beneficiaries

macroeconomic forecasting using diffusion indexes this article studies forecasting a macroeconomic time series variable using a large number of predictors the predictors are summarized using a small number of indexes constructed by principal component analysis an approximate dynamic factor model serves as the statistical framework for the estimation of the indexes and construction of the forecasts the method is used to construct 6 12 and 24 monthahead forecasts for eight monthly u s macroeconomic time series using 215 predictors in simulated real time from 1970 through 1998 during this sample period these new forecasts outperformed univariate autoregressions small vector autoregressions and leading indicator models