rationality of preliminary money stock estimates earlier studies have presented mixed evidence on the rationality of the federal reserve s preliminary money stock estimates the authors investigate the rationality of m1a m1 m2 and m3 for both seasonally and not seasonally adjusted data they find preliminary growth rates of these aggregates to be rational for not seasonally adjusted data but irrational when data are seasonally adjusted using monte carlo studies the authors conclude that irrationality in seasonally adjusted data arises from the specific seasonal adjustment procedure used by the federal reserve as a result researchers conducting similar tests may want to focus exclusively on not seasonally adjusted data copyright 1995 by mit press

frontiers of real time data analysis in the past ten years researchers have explored the impact of data revisions in many different contexts researchers have examined the properties of data revisions how structural modeling is affected by data revisions how data revisions affect forecasting the impact of data revisions on monetary policy analysis and the use of real time data in current analysis this paper summarizes many of the questions for which real time data analysis has provided answers in addition researchers and institutions have developed better real time data sets around the world still additional research is needed in key areas and research to date has uncovered even more fruitful areas worth exploring jel c52 c53 c80 e01

the hazard of moral hazard untangling the asian crisis abstract the paper critically examines the explanations of the asian crisis which emphasize the role of national policies and institutions that allegedly created moral hazard by overprotecting the investors industrial policy crony capitalism and government guarantees accorded to banks and industrial firms that are considered too important to fail we also discuss the international dimension of the moral hazard argument in the presence of international monetary fund imf bail out the paper finds these explanations theoretically ill defined and empirically weak and argues that the prescriptions for changes in policy and institutions based on them are unlikely to prevent similar kinds of crises in the future

predicting early data revisions to u s gdp and the effects of releases on equity markets the effects of data uncertainty on real time decision making can be reduced by predicting data revisions to u s gdp growth we show that survey forecasts efficiently predict the revision implicit in the second estimate of gdp growth but that forecasting models incorporating monthly economic indicators and daily equity returns provide superior forecasts of the data revision implied by the release of the third estimate we use forecasting models to measure the impact of surprises in gdp announcements on equity markets and to analyze the effects of anticipated future revisions on announcement day returns we show that the publication of better than expected third release gdp figures provides a boost to equity markets and if future upward revisions are expected the effects are enhanced during recessions

macroeconomic uncertainty through the lens of professional forecasters abstractwe analyze the evolution of macroeconomic uncertainty in the united states based on the forecast errors of consensus survey forecasts of various economic indicators comprehensive information contained in the survey forecasts enables us to capture a real time measure of uncertainty surrounding subjective forecasts in a simple framework we jointly model and estimate macroeconomic common and indicator specific uncertainties of four indicators using a factor stochastic volatility model our macroeconomic uncertainty estimates have three major spikes has three major spikes aligned with the 1973 1975 1980 and 2007 2009 recessions while other recessions were characterized by increases in indicator specific uncertainties we also show that the selection of data vintages affects the estimates and relative size of jumps in estimated uncertainty series finally our macroeconomic uncertainty has a persistent negative impact on real economic activity rather than producing wait and see dynamics

exploring investment potential in a context of nuclear phase out uncertainty perfect vs imperfect electricity markets abstract in view of the ongoing nuclear power debate in europe we analyze how uncertainty about a nuclear phase out affects investment capacity decisions by belgian electricity suppliers depending on the type of market structure considered to achieve this goal we build a structural model and solve it by using game theoretic and optimization approaches in order to consider the different types of market structure namely oligopoly simplified to a duopoly in this case and the two extremes of the competition spectrum i e monopoly and perfect competition we show that higher levels of investment in new electricity generation capacity are reached with decreasing probability of nuclear license extension and or with higher levels of competition in the market moreover investments in perfectly competitive markets are less influenced by changes in the probability of future nuclear license extension resulting in a more stable long term investment climate however the consideration of possible changes in market structure and gradual nuclear phase out is crucial in order to not overestimate investment potential in belgium

debt maturity and the international financial architecture this paper presents a theory of the maturity of international sovereign debt and derives its implications for the reform of the international financial architecture the analysis is based on a model in which the need to roll over external debt disciplines the policies of debtor countries but makes them vulnerable to unwarranted debt crises due to bad shocks the paper presents a welfare analysis of several measures that have been discussed in recent debates such as international lending in last resort or the establishment of a mechanism for suspending payments on the external debt of crisis countries jel f34 o19

pooling forecasts in linear rational expectations models abstract estimating linear rational expectations models in a limited information setting requires replacing the expectations of future endogenous variables either with instrumented actual values or with forecast survey data applying the method of gottfries and persson empirical examinations of the information sets of economic agents quarterly journal of economics 103 251 259 i show how to augment these methods with actual future values of the endogenous variables to improve statistical efficiency the method is illustrated with an application to the us hybrid new keynesian phillips curve where traditional lagged instruments and the median forecast from the survey of professional forecasters both appear to miss significant information used by price setters so that forecast pooling with actual values improves the statistical fit to inflation

information aggregation around macroeconomic announcements revisions matter abstract i show that an empirical relation exists between stock returns on macroeconomic news announcement days and the future revisions of the released data but that this link differs across the business cycle using three major macroeconomic series that undergo significant revisions nonfarm payroll gross domestic product and industrial production i present evidence that daily returns on the standard poor s 500 index and revisions are positively related in expansions and negatively related in recessions the results suggest that revisions do matter i e that investors care about the final revised value of a macroeconomic series that they infer accurate information from the release of the preliminary inaccurate report and that the more precise information is aggregated into prices on the day of the initial announcement the results are consistent with the predictions of rational expectations trading models around public announcements combined with well established empirical results on the asymmetric interpretation of information across the business cycle

collective action clauses how do they affect sovereign bond yields abstract we study the effects of the adoption of collective action clauses cacs on government bond yields by exploiting secondary market data on sovereign bonds quoted in international markets from march 2007 to april 2011 cacs are assessed security by security using a panel data approach we find a u shaped effect of cacs on yields according to the credit rating of the issuer while the impact is negligible for the highest ratings a significant yield discount emerges for mid range ratings which is smaller for bad ratings and possibly insignificant for the worst ratings this relationship appears fairly robust across a number of checks this evidence may reflect the fact that cacs are valuable because they help with orderly restructuring unless the perceived probability of default is too small nevertheless at low ratings this effect can be weakened by an increasing risk of moral hazard

hares and stags in argentinean debt restructuring abstract the latest argentinean debt restructuring was the first time the resolution of a modern financial crisis was completely handed over to the private financial markets without official intervention by public institutions we argue that the resulting harshest haircut for private creditors in history can be at least partially related to a stag hunt game played by creditors we show that incentive schemes provided by the argentinean government were factors facilitating this haircut the analysis suggests that contrary to the recognition in the literature the effects of collective action clauses and exit consents within a restructuring process are not equal in the case of argentina the inclusion of collective action clauses in the defaulted bonds could have benefited the holdout creditors

the state dependence of output revisions abstract this paper investigates whether economic activity dynamics predict gdp revisions using panel data from 15 oecd countries we find that economic activity predicts gdp revisions early releases tend to overestimate gdp growth during slowdowns and vice versa we also find that the source of the predictability could be related to the sampling of information collection finally the predictability comes from short term economic activity dynamics rather than business cycle position

improving real time estimates of output and inflation gaps with multiple vintage models real time estimates of output gaps and inflation gaps differ from the values that are obtained using data available long after the event part of the problem is that the data on which the real time estimates are based is subsequently revised we show that vector autoregressive models of data vintages provide forecasts of post revision values of future observations and of already released observations capable of improving estimates of output and inflation gaps in real time our findings indicate that annual revisions to output and inflation data are in part predictable based on their past vintages this article has online supplementary materials

monetary misperceptions output and inflation dynamics we revisit the contribution of misperceived money to business cycles and in particular to the inertial dynamics of inflation following a monetary policy shock we establish three things first the difference between preliminary and revised money data captures monetary misperceptions well second misperceived money is quantitatively substantial and also matters significantly for economic activity and third imperfect information about monetary aggregates can help the standard nk model exhibit inertial inflation dynamics

are farrowing intentions rational forecasts this paper tests whether quarterly data on hog farmers sow farrowing intentions released in hogs and pigs are rational forecasts of actual farrowings the empirical results show that neither one nor two quarter ahead intentions are rational forecasts econometric methods and the implications of the empirical results for the rational expectations hypothesis are also discussed

excess capacity as a barrier to entry an empirical appraisal this paper examines excess capacity barriers to entry and investment dynamics in a sample of thirty eight chemical product industries logit and log linear models of investment behavior are estimated and specific case examples are considered the results show that incumbents rarely built excess capacity pre emptively in an effort to deter entry in general entrants and incumbents exhibited similar investment behavior

monetary information and monetary neutrality abstract the monetary theory of business fluctuations in market clearing models constructed under the rational expectations assumption as advanced by lucas and others involves the idea that suppliers and demanders will typically misinterpret movements in the general level of prices as representing more or less favorable relative opportunities for real activities the present paper examines the consequences of agents possessing contemporaneous monetary information of a potentially noisy variety for the non neutrality of unanticipated monetary events within such an equilibrium business cycle model this modification of the information structure has the strong testable implication that real activity will be uncorrelated with contemporaneous monetary data

sovereign debt restructuring since the early 1980 s patterns of emergingmarket finance have changed significantly greater integration of capital markets and a trend toward a greater use of direct lending through bonds has led to relatively decreased use of indirect finance through syndicated bank loans these changes have produced benefits to investors through opportunities for risk diversification and to emerging market sovereign borrowers by increasing the investor base the broadened investor base in bond financing however raises problems of coordination and collective action in the event of a sovereign borrower s default and restructuring now three parties are involved in determining the debt markdown required to produce solvency the debtor creditors and the global taxpayer through international financial institutions ifi s the complex relationships among the borrowers creditors and the global taxpayer have made restructuring obligations a costly and time consuming exercise especially with the possibility of holdouts both the sovereign borrower and its creditors have an incentive to avoid a restructuring in the hope of financial assistance from the global taxpayer sovereign governments may not undertake the politically painful steps involved in beginning a restructuring when there is always the hope that official assistance will be forthcoming creditors may not accept a reduction in the value of their claims also in the hope that official assistance will be forthcoming costs of postponed and disorderly restructurings are real and substantial delays in restructuring can drain a country s resources and increase the ultimate costs of restoring financial sustainability creditors bear a burden as well because the losses associated with the restructuring are reflected in values of

investment in electricity markets with asymmetric technologies abstract capacity investments in electricity markets is one of the main issues in the restructuring process to ensure competition and enhance system security of networks we study competition between hydro and thermal electricity generators under demand uncertainty producers compete in quantities and each is constrained the thermal generator by capacity and the hydro generator by water availability we analyze a two period game emphasizing the incentives for capacity investments by the thermal generator we characterize both markov perfect and open loop equilibria in the markov perfect equilibrium investment is discontinuous in initial capacity and higher than it is in the open loop equilibrium however since there are two distortions in the model equilibrium investment can be either higher or lower than the efficient investment

sovereign insolvency procedures a comparative look at selected proposals abstract the most practicable short term approaches for sovereign debt restructuring would include a code of conduct voluntary approach and collective action clauses contractual approach in the medium term a sovereign insolvency procedure statutory approach may have an important role to play because it would be a comprehensive instrument designed to coordinate different creditor groups prior to and during a debt crisis this paper provides a survey of six comprehensive policy proposals for a sovereign bankruptcy procedure it points to approaches that could improve existing proposals and creates a basis for new proposals which could prove conducive to reaching political consensus

forecast encompassing tests and probability forecasts we consider tests of forecast encompassing for probability forecasts for both quadratic and logarithmic scoring rules we propose test statistics for the null of forecast encompassing present the limiting distributions of the test statistics and investigate the impact of estimating the forecasting models parameters on these distributions the small sample performance is investigated in terms of small numbers of forecasts and model estimation sample sizes we show the usefulness of the tests for the evaluation of recession probability forecasts from logit models with different leading indicators as explanatory variables and for evaluating survey based probability forecasts copyright c 2010 john wiley sons ltd

strategic investment and conjectural variations abstract this paper analyzes investment decisions under the alternative assumptions of competitive collusive open loop non cooperative and feedback non cooperative behavior steady state capital stocks prices and outputs are obtained and compared the paper shows that one of the linear feedback equilibrium decision rule coefficients is a dynamic version of a contemporaneous conjectural variation the same decision rule coefficients are shown to imply a particular value for the contemporaneous conjecture the implied conjecture embodies subgame perfection and approaches the competitive value as the number of firms in the industry increases

on the measurement of capacity utilization capacity utilization is usually defined as the ratio of actual output to the output corresponding to 1 the minimum point on the short run average total cost curve and 2 the point of tangency between the long run average total cost and short run average total cost curves in practice however capacity utilization is often measured as the ratio of actual to the maximum potential output consistent with a given capital stock this paper demonstrates how to estimate the theoretical measures of capacity utilization and examines the correlation between three measures of capacity utilization and the mcgraw hill estimates of capacity utilization using data from a sample of u s privately owned electric utilities for 1961 83 copyright 1989 by blackwell publishing ltd

the imf s unmet challenges the international monetary fund is a controversial institution whose interventions regularly provoke passionate reactions we will argue that there is an important role for the imf in helping to solve information commitment and coordination problems with significant implications for the stability of national economies and the international monetary and financial system in executing these functions the effectiveness of the imf like that of a football referee depends on whether the players see it as competent and impartial we will argue that the fund s perceived competence and impartiality and hence its effectiveness are limited by its failure to meet four challenges concerning the quality of its surveillance of individual countries groups of countries and the global system the relevance of conditionality in loan contracts the utility of the fund s approach to debt problems and the fund s failure to adopt a system of governance that gives appropriate voice to different stakeholders these problems of legitimacy will have to be addressed in order for the imf to play a more effective role in the 21st century

data revisions are not well behaved we document the empirical properties of revisions to major macroeconomic variables in the united states our findings suggest that they do not satisfy simple desirable statistical properties in particular we find that these revisions do not have a zero mean which indicates that the initial announcements by statistical agencies are biased we also find that the revisions are quite large compared to the original variables and they are predictable using the information set at the time of the initial announcement which means that the initial announcements of statistical agencies are not rational forecasts

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

geographical disaggregation of sectoral inflation econometric modelling of the euro area and spanish economies abstractthis article studies the performance of different modelling strategies for 969 and 600 monthly price indexes disaggregated by sectors and geographical areas in spain regions and in the euro area 12 ea12 countries we also provide by means of spatial bi dimensional vector equilibrium correction models for all pairs of prices between neighbours a description of spatial cointegration restrictions that could be useful for understanding price setting within an economy we study the relevance of the regional disaggregation by using the proposed models to forecast the corresponding headline inflation and testing whether it is more accurate than alternative forecasts based on aggregated models the results for spain show that this is the case country disaggregation forecasts are also reliable for the ea12 but only because derived headline inflation forecasting is not significantly worse than alternative forecasts the models in this article can be used for competitive analysis and other macro and r

are preliminary announcements of the money stock rational forecasts abstract we develop a theoretical framework of analyzing preliminary announcements of economic data and then apply this framework to the money stock we find that preliminary announcements of the money stock are best characterized as measured with classical errors in variables that is the revision is not correlated with the true value of the series the revision is however forecastable using information available at the time of the preliminary announcement our ability to forecast the revision implies that preliminary announcements are not rational estimates of the true money stock

data revisions and periodic properties of macroeconomic data many macroeconomic time series variables show signs of periodicity that is seasonal heteroskedasticity and seasonally varying autocorrelation structures this paper argues that these periodic properties could in part be due to data revisions in case such revisions follow a particular format periodicity is shown to appear when quarterly data are revised by allocating updated annual information across the quarters in previous years an illustration for four waves of seventeen dutch macroeconomic data emphasizes this result

sovereign default private sector creditors and the ifis abstract the data reveal that emerging market sovereign borrowing from international financial institutions ifis is small intermittent and countercyclical compared to that from private sector creditors the ifi loan contracts offered to sovereigns differ from the private ones in that they are more enforceable and have conditionality arrangements attached to them taking these contractual differences as given this paper builds a quantitative model of a sovereign borrower and argues that better enforceability of ifi loan contracts is the main institutional feature that explains the size and cyclicality while conditionality accounts for the intermittency of borrowing from the ifis

can we improve upon preliminary estimates of payroll employment growth we explore the feasibility of improving upon the preliminary estimates of payroll employment growth from the u s bureau of labor statistics by predicting subsequent revisions to these estimates using the preliminary estimates themselves and other information available concurrently results of statistical tests suggest that the preliminary estimates can be improved upon that is they are not efficient forecasts of the revised estimates the improvement of preliminary estimates as indicators of estimates of employment growth following annual benchmarks is particularly large the unanticipated component of the revision based on the annual benchmarks is reduced by more than 22

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

monetary policy rules based on real time data this paper examines the magnitude of informational problems associated with the implementation and interpretation of simple monetary policy rules using taylor s rule as an example i demonstrate that real time policy recommendations differ considerably from those obtained with ex post revised data further estimated policy reaction functions based on ex post revised data provide misleading descriptions of historical policy and obscure the behavior suggested by information available to the federal reserve in real time these results indicate that reliance on the information actually available to policy makers in real time is essential for the analysis of monetary policy rules

learning asymmetries in real business cycles when a boom ends the downturn is generally sharp and short when growth resumes the boom is more gradual our explanation rests on learning about productivity when agents believe productivity is high they work invest and produce more more production generates higher precision information when the boom ends precise estimates of the slowdown prompt decisive reactions investment and labor fall sharply when growth resumes low production yields noisy estimates of recovery noise impedes learning slows recovery and makes booms more gradual than downturns a calibrated model generates growth rate asymmetry similar to macroeconomic aggregates fluctuations in agents forecast precision match observed countercyclical errors of forecasters

growth expectations undue optimism and short run fluctuations this paper proposes a two step procedure in order to identify belief shocks shocks to expectations about the current state of the economy first we use the survey of professional forecasters to me

how informative are preliminary announcements of the money stock in canada the authors examine hypotheses about the relation between provisional estimates and final values of m1 m2 and m3 and their growth rates in canada using monthly data and multiple revisions preliminary values cannot be viewed as final values plus an error revision uncorrelated with these but they are approximately unbiased forecasts of final values the second difference in short term interest rates is a leading indicator of revisions in m1 growth rates and revisions exhibit significant seasonality hence preliminary values are not completely rational forecasts

restructuring sovereign debt this paper provides new empirical evidence relevant to the debate over the desirability of reforms to the way that financial markets and the international community deal with sovereign debt crises in particular given the ongoing opposition of investors and some sovereigns to greater use of collective action clauses cacs in emerging market bonds we present new evidence on the way that financial markets have priced the use or non use of cacs

does cross sectional forecast dispersion proxy for macroeconomic uncertainty new empirical evidence we investigate the link between forecast dispersion and macroeconomic uncertainty resulting from the data revision structure of inflation and real output we find that disagreement is significantly related to data uncertainty however results are considerably more distinctive for inflation uncertainty

the response by the norwegian aluminium industry to changing market structure abstract this paper analyses how changes in market structure have affected the margins measured by the lerner index of norwegian aluminium plants instead of showing the expected negative trend due to increased competition internationally the margins are found to move procyclically around a constant that significantly exceeds zero three explanations for this stability in the levels of the margins are identified a better exploitation of scale economies increased productivity and product specialisation which allows norwegian producer prices to increase more rapidly than the international reference price

sovereign liquidity crises the strategic case for a payments standstill is sovereign borrowing so different from corporate debt that there is no need for bankruptcy style procedures to protect debtors with the waiver of immunity sovereign debtors who already face severe disruption from short term creditors grabbing their currency reserves are also exposed to litigious creditors trying to seize what assets they can in a race of the vultures shielding sovereign debtors from inter creditor conflict by authorised standstills on payments doubt less runs some risk of debtor s moral hazard but the lack of an orderly procedure for resolving sovereign liquidity crises means that the imf is de facto forced to bail out countries in trouble this leads to both debtor and creditor moral hazard as investors lend without monitoring knowing that their investments are essentially guaranteed the strategic case for legalising standstills is to rescue the international financial system from this time consistent trap

an integrated view of tests of rationality market efficiency and the short run neutrality of monetary policy abstract this paper analyzes an important class of models in which expectations play an important role topics included in the analysis are tests of 1 rationality of forecasts in either market or survey data 2 capital market efficiency 3 the short run neutrality of monetary policy and 4 granger causality in macroeconometric models the common elements of these tests are highlighted in particular cross equation tests for rationality or the short run neutrality of money are shown to be equivalent to more common regression tests in the literature these results demonstrate that the exact specification of the relevant information set used in rational forecasts is not necessary for the cross equation tests to have desirable asymptotic properties also discussed are the conditions for identification of coefficients and testability of hypotheses

are statistical reporting agencies getting it right data rationality and business cycle asymmetry this article provides new evidence on the rationality of early releases of industrial production ip and producer price index ppi data rather than following the usual practice of examining only first available and fully revised data we examine the entire revision history for each variable thus we are able to assess for example whether earlier releases of data are in any sense less rational than later releases and when data become rational our findings suggest that seasonally unadjusted ip and ppi become rational after approximately 3 4 months whereas seasonally adjusted versions of these series remain irrational for at least 6 12 months after initial release for all variables examined we find evidence that the remaining revision is predictable from its own past or from publicly available information in other economic and financial variables in addition we find a clear increase in the volatility of revisions during recessions suggesting that early data releases are less reliable in toughe

optimal debt structure and the number of creditors within an optimal contracting framework we analyze the optimal number of creditors a company borrows from we also analyze the optimal allocation of security interests among creditors and intercreditor voting rules that govern renegotiation of debt contracts the key to our analysis is the idea that these aspects of the debt structure affect the outcome of debt renegotiation following a default debt structures that lead to inefficient renegotiation are beneficial in that they deter default but they are also costly if default is beyond a manager s control the optimal debt structure balances these effects we characterize how the optimal debt structure depends on firm characteristics such as its technology its credit rating and the market for its assets

the on the run liquidity phenomenon abstract we test the implications of a model of multi asset speculative trading in which liquidity differentials between on the run and off the run u s treasury bonds ensue from endowment shocks in the presence of two realistic market frictions information heterogeneity and imperfect competition among informed traders and a public signal our evidence suggests that i off on the run liquidity differentials are economically and statistically significant even after controlling for several of the bonds intrinsic characteristics such as duration convexity repo rates or term premiums and ii off on the run liquidity differentials are smaller immediately following bond auction dates and larger when the uncertainty surrounding the ensuing auction allocations is high when the dispersion of beliefs across informed traders is high and when macroeconomic announcements are noisy consistent with our model

an assessment on the quality of china s preliminary data of quarterly gdp announcements abstractthis article examines the quality of china s preliminary announcements of the quarterly gdp we modify the tests for unbiasedness and efficiency by incorporating the fourier approximation to capture the effect of the state of the economy and employing the kiefer vogelsang and bunzel kvb approach developed by kvb in 2000 to reconstruct the tests to improve the finite sample properties the results show that 1 there is no enough evidence to support that the preliminary and first revised data are unbiased and efficient 2 there exist systematic errors related to the state of the economy and hence information about the state of the economy was not incorporated into the gdp data furthermore we find that there is a possibility that these systematic errors associated with the stages of the business cycle may offset each other and there is also a possibility that there exist offsetting errors in the underlying components of gdp

capacity investment preemption and commitment in an infinite horizon model the commitment value of capacity is analyzed in an infinite horizon duopoly model the paper focuses on the role of alternative behavioral assumptions about the ability of firms to commit to investment paths each firm s investment strategy in a feedback nash equilibrium is shown to be a decreasing function of its rival s current capacity this creates an incentive for a firm to expand its capacity to preempt subsequent rival investment in a precommitment equilibrium there are no incentives to invest preemptively as a consequence steady state capacity levels are greater in a feedback nash equilibrium than in a precommitment equilibrium copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

forecasting substantial data revisions in the presence of model uncertainty a recent revision to the preliminary measurement of gdp e growth for 2003q2 caused considerable press attention provoked a public enquiry and prompted a number of reforms to uk statistical reporting procedures in this article we compute the probability of substantial revisions that are greater in absolute value than the controversial 2003 revision the predictive densities are derived from bayesian model averaging over a wide set of forecasting models including linear structural break and regime switching models with and without heteroscedasticity ignoring the nonlinearities and model uncertainty yields misleading predictives and obscures recent improvements in the quality of preliminary uk macroeconomic measurements

taking the pulse of the economy measuring gdp national income and product accounts best known by one of their principle aggregates gross domestic product gdp are produced by virtually every nation in the world simon kuznets and richard stone both later to become nobel prize winners led the creation of the national accounts for the united states and the united kingdom respectively so what exactly does gdp measure how is it constructed why do the gdp and other national accounts estimates sometimes present a different picture of the economy than other economic indicators this article is intended to help answer these questions by providing a broad overview of the measurement techniques used in estimating gdp and the national accounts in the united states in the united states the gdp and the national accounts estimates are fundamentally based on detailed economic census data and other information that is available only once every five years the challenge lies in developing a framework and methods that take these economic census data and combine them using a mosaic of monthly quarterly and annual economic indicators to produce quarterly and annual gdp estimates for example one problem is that the other economic indicators that are used to extrapolate gdp in between the five year economic census data such as retail sales housing starts and manufacturers shipments of capital goods are often collected for purposes other than estimating gdp and

introducing the euro sting short term indicator of euro area growth we set out a model to compute short term forecasts of the euro area gdp growth in real time to allow for forecast evaluation we construct a real time dataset that changes for each vintage date and includes the exact information that was available at the time of each forecast with this dataset we show that our simple factor model algorithm which uses an easy to replicate methodology is able to forecast the euro area gdp growth as well as professional forecasters who can combine the best forecasting tools with the possibility of incorporating their own judgement in this context we provide examples showing how data revisions and data availability affect point forecasts and forecast uncertainty copyright 2010 john wiley sons ltd

how quickly do forecasters incorporate news evidence from cross country surveys using forecasts from consensus economics inc we provide evidence on the efficiency of real gdp growth forecasts by testing whether forecast revisions are uncorrelated as the forecast data used are multi dimensional 18 countries 24 monthly forecasts for the current and the following year and 16 target years the panel estimation takes into account the complex structure of the variance covariance matrix due to propagation of shocks across countries and economic linkages among them efficiency is rejected for all 18 countries forecast revisions show a high degree of serial correlation we then develop a framework for characterizing the nature of the inefficiency in forecasts for a smaller set of countries the g 7 we estimate a var model on forecast revisions the degree of inefficiency as mananifested in the serial correlation of forecast revisions tends to be smaller in forecasts of the usa than in forecasts for european countries our framework also shows that one of the sources of the inefficiency in a country s forecasts is resistance to utilizing foreign news thus the quality of forecasts for many of these countries can be significantly improved if forecasters pay more attention to news originating from outside their respective countries this is particularly the case for canadian and french forecasts which would gain by paying greater attention than they do to news from the usa and germany respectively

tests of equilibrium macroeconomics using contemporaneous monetary data abstract this paper uses contemporaneous monetary data to carry out econometric tests of the equilibrium approach to modelling the relation between monetary disturbances and macroeconomic fluctuations the theoretical analysis introduces into an equilibrium macroeconomic model the availability of preliminary data on current monetary aggregates and the process of accumulation of revised monetary data the econometric analysis tests two hypothesis derived from this extended model one hypothesis concerns the neutrality of perceived monetary policy the econometric results imply rejection of this hypothesis the other hypothesis concerns the non neutrality of errors in preliminary monetary data the econometric results fail to reject the contrary of this hypothesis these tests provide strong evidence against the reality of the equilibrium approach

dynamic oligopoly with capacity adjustment costs abstract the literature on strategic investment emphasized the case of completely irreversible investment this paper considers an oligopoly model in which investment is reversible and capacity is subject to adjustment costs an n player linear quadratic differential game is analyzed existence and characterization results for perfect equilibrium feedback strategies are provided feedback strategies provide incentives for each player to invest strategically so as to preempt subsequent expansion by rivals a larger set of perfect equilibria is constructed by using memory dependent trigger strategies equilibria of this type are shown to support joint value maximization for some initial states and asymmetric steady states

identifying a dominant firm s market power among sellers of a homogeneous product an application to alcoa this paper measures the extent of alcoa s dominant firm market power in the post war us aluminium industry an indirect procedure that combines estimation of the fringe supply elasticity market demand elasticity and extant market share data generates the estimate of alcoa s residual demand elasticity which infers the firm s market power results show that alcoa s market power declines with fringe s expansion

forecastable money growth revisions a closer look at the data the data for preliminary and revised u s money growth data are reexamined the findings contrast with those of the previous literature which has concluded that the data revisions behave like classical measurement errors this paper finds that the revisions are forecastable which contradicts the random measurement hypothesis as well as the efficient forecast hypothesis although ill behaved in this manner it is possible that the announcements represent observations rather than forecasts however the evidence suggests that they are a mixture of the two this finding offers a potential explanation for the failure of the data to show significant real effects of money growth revisions

news and noise in g 7 gdp announcements revisions to gdp announcements are known to be quite large in all g 7 countries quarterly growth rate revisions are regularly more than a full percentage point at an annualized rate we examine the predictability of these revisions using standard statistical tests of whether the preliminary announcement is a rational forecast of the subsequently revised data previous work suggests that u s gdp revisions are largely unpredictable as would be the case if the revisions reflect news not available at the time that the preliminary number is produced we find that the degree of predictability varies throughout the g 7 although we find little predictability in u s revisions the data revisions for several foreign countries are highly predictable we also perform a simple real time forecasting exercise showing that for several countries the predictability of data revision could be used to generate improved preliminary data

how the uk economy weathered the financial storm prior to the global financial crisis of 2008 the uk had the largest banking sector asset to gdp ratio among large countries and had experienced rapid real property price increases as well as a persistent current account deficit in the preceding decade these factors together with its role as an international financial centre made the uk economy particularly vulnerable to the onset of the global financial crisis although the initial drop in real gdp was steep we provide evidence that the economy has weathered the financial storm better than many feared and has fared no worse than its peer group of major economies in this paper we assess the reasons underlying this outcome including the possibility of exaggerated vulnerabilities global economic recovery the flexible supply side of the uk economy as well as fiscal financial and monetary policy interventions our analysis suggests that all of these factors played a role in cushioning the impact on the uk real economy leading to a more benign outcome than most observers expected

on the informational role of term structure in the us monetary policy rule abstract this paper uses a structural approach based on the indirect inference principle to estimate a standard version of the new keynesian monetary nkm model augmented with term structure using both revised and real time data the estimation results show that the term spread and policy inertia are both important determinants of the us estimated monetary policy rule whereas the persistence of shocks plays a small but significant role when revised and real time data of output and inflation are both considered more importantly the relative importance of term spread and persistent shocks in the policy rule and the shock transmission mechanism drastically change when it is taken into account that real time data are not well behaved

moral hazard asset price bubbles capital flows and the east asian crisis the first tests we examine the view that the recent east asian crisis was precipitated by bursting asset price bubbles which had been fuelled by strong capital inflows that were largely the result of a moral hazard problem in financial intermediation and was exacerbated by a vicious cycle of asset price deflation and incipient and actual capital flight we find evidence of stock market bubbles in all east asian economies examined although not in australia we examine various categories of capital flows to these countries and find in particular relatively high reversible components in portfolio flows to east asian economies

real time prediction with u k monetary aggregates in the presence of model uncertainty a popular account for the demise of the u k s monetary targeting regime in the 1980s blames the fluctuating predictive relationships between broad money and inflation and real output growth yet ex post policy analysis based on heavily revised data suggests no fluctuations in the predictive content of money in this paper we investigate the predictive relationships for inflation and output growth using both real time and heavily revised data we consider a large set of recursively estimated vector autoregressive var and vector error correction models vecm these models differ in terms of lag length and the number of cointegrating relationships we use bayesian model averaging bma to demonstrate that real time monetary policymakers faced considerable model uncertainty the in sample predictive content of money fluctuated during the 1980s as a result of data revisions in the presence of model uncertainty this feature is only apparent with real time data as heavily revised data obscure these fluctua