the fisher hypothesis and the forecastability and persistence of inflation abstract for the period 1860 to 1939 the simple correlation of the u s commercial paper rate with the contemporaneous inflation rate is 0 17 the corresponding correlation for the period 1950 to 1979 is 0 71 this paper attributes this apparent change in the fisher relation to differences in the stochastic process of inflation rather than a change in any structural relationship between interest rates and expected inflation contrary to recent claims in the literature there is little evidence of inflation non neutrality in data from the pre world war i period

aggregation of exponential smoothing processes with an application to portfolio risk evaluation in this paper we propose a unified framework to analyse contemporaneous and temporal aggre gation of exponential smoothing ewma models focusing on a vector ima 1 1 model we obtain a closed form representation for the parameters of the contemporaneously and temporally aggregated process as a function of the parameters of the original one in the framework of ewma estimates of volatility we present an application dealing with value at risk var pre diction at different sampling frequencies for an equally weighted portfolio composed of multiple indices we apply the aggregation results by inferring the decay factor in the portfolio volatility equation from the estimated vector ima 1 1 model of squared returns empirical results show that var predictions delivered using this suggested approach are at least as accurate as those obtained by applying the standard univariate riskmetricstm methodology

cyclical fluctuations in strike activity using a set of data on contracts and strikes for the period 1970 81 the author distinguishes among the roles of aggregate business conditions labor market conditions and product market conditions in the determination of strike incidence and duration strike incidence is found to be highest in industries that are depressed relative to the rest of the economy but in regions with low unemployment this finding is consistent with the theory that the cost of a strike to a firm increases with the demand for its product and the cost of a strike to the union increases with unemployment another finding however is that strikes are longest in industries that are booming relative to the rest of the economy

evaluating interval forecasts a complete theory for evaluating interval forecasts has not been worked out to date most of the literature implicitly assumes homoskedastic errors even when this is clearly violated and proceed by merely testing for correct unconditional coverage consequently i set out to build a consistent framework for conditional interval forecast evaluation which is crucial when higher order moment dynamics are present the new methodology is demonstrated in an application to the exchange rate forecasting procedures advocated in risk management

nowcasting global economic growth a factor augmented mixed frequency approach assessing accurately global economic conditions is a great challenge for economists the international monetary fund proposes within its periodic world economic outlook report a measure of the global gdp annual growth that is generally considered as the benchmark nowcast by macroeconomists in this paper we put forward an alternative approach to provide monthly nowcasts of the annual global growth rate our approach builds on a factor augmented mixed data sampling fa midas model that enables i to account for a large monthly database including various countries and sectors of the global economy and ii to nowcast a low frequency macroeconomic variable using higher frequency information pseudo real time results over the period 2010 16 show that this approach provides reliable and timely nowcasts of the world gdp annual growth on a monthly basis

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

some consequences of temporal aggregation in empirical analysis i derive the generating mechanism of a temporally aggregated process when the disaggregated one belongs to the vector autoregressive integrated moving average class i then study the effects of temporal aggregation on a set of characteristics of usual interest such as exogeneity causality cointegration and common features an empirical example with canadian interest rates illustrates the main issues

the world is not enough small open economies and regional dependence in this paper we explicitly introduce regional factors into a global dynamic factor model we combine new open economy factor models emphasizing global shocks with the recent findings of regional importance in the business cycle synchronization literature the analysis is applied to a large panel of domestic data for four small open economies we find that global and regional shocks explain roughly 30 and 20 percent respectively of the business cycle variation in all countries while global shocks have most impact on trade variables regional shocks explain a relatively large share of the variation in cost variables

wage bargaining inventories and union legislation this paper analyses a strategic bargaining game where the firm may or may not be able to sell out of its inventory of finished goods during a strike firms and the union are both risk neutral and have the same discount rate it is shown that the wage equilibrium corresponds to the axiomatic nash bargaining solution where the threatpoints are the agents payoffs should bargaining continue indefinitely we use the 1980 and 1982 employment acts to test this theory interpreting that legislation change as changing the firm s threatpoint but not its bargaining power this allows us to identify the value of the firm s threatpoint post 1982 formal tests support the theory also consistent with the theory it is found that union wages decrease with inventories after 1982 but not before and that the union wage gap is smaller after 1982 wage bargaining as described in the strategic bargaining literature is a peaceful affair if there is no agreement workers simply withdraw their labour for one period and there is a consequent one period loss of production for the firm but strikes tend to generate a lot of conflict in the u k in the 1970s striking unions would form picket lines across the factory gates their aim was not only to prevent strikebreakers going to work but also to stop lorries delivering goods conversely firms often with the help of the police would try to get the lorries across those lines the employment acts of 1980 and 1982 stopped this struggle stopping lorries crossing picket lines had always been illegal but this new legislation gave firms power to have picket lines immediately lifted should striking workers act illegally the courts would immediately sequester the union s assets if its members refused to comply with the law using the strategic bargaining approach this paper considers the equilibrium effect of this change in legislation on union wage formation using wage and inventory data from a panel of firms across this time period this paper also formally tests that theory there have been two main approaches to bargaining theory the strategic bargaining

world steel production a new monthly indicator of global real economic activity this paper proposes world steel production as an indicator of global real economic activity world steel production data is published with only a one month delay thereby providing timely information for world real gdp forecasters we find that world steel production and lutz kilian s 2009 index of global real economic activity generate large gains in forecasting world real gdp relative to an autoregressive benchmark a forecast combination of world steel production kilian s 2009 index of global real economic activity and an index of the industrial production of oecd countries plus six non oecd emerging economies produces significant gains in forecasting world real gdp relative to an autoregressive benchmark

estimating strike effects in a general model of prices and quantities estimates of the effect of strikes on the production price and purchases of north american automobiles are provided over the period 1966 79 the estimates are based on a model that reflects the decisions of both consumers and producers and that captures important intertemporal adjustments before during and after the strike to allow for inventory buildup in anticipation of the strike as well as inventory depletion during the strike and replacement afterward the results generally indicated that both consumers and producers rationally responded to the expected and the actual event of the strike through a variety of related intertemporal adjustments and while the initial effects are in some instances quite pronounced the long run effects are usually minimal

logit estimates of strike incidence from canadian contract data logit estimates of strike incidence are made based on a unique and comprehensive data set of 2 437 collective agreements the appropriate level of aggregation since that is where bargaining occurs the results are interpreted through a theoretical framework emphasizing that strikes are more likely when the joint costs of using the strike mechanism are low relative to the cost of alternative mechanisms for achieving the same purposes such functions of strikes are to generate information elicit truth telling establish reputations provide catharsis and solve intraorganizational conflict

the production and inventory behavior of the american automobile industry understanding inventory movements is central to an understanding of business cycles this paper presents an empirical study of the behavior of inventories in the automobile industry it finds that inventory behavior is well explained by the assumption of intertemporal optimization with rational expectations the underlying cost structure appears to have substantial costs of changing production as well as substantial costs of being away from target inventory thelatter being a function of current sales given this cost structure whether inventory behavior is stabilizing or destabilizing depends on the characteristics of the demand process in the automobile industry inventory behavior is destabilizing the variance of production is larger than the variance of sales

international business cycles world region and country specific factors the paper investigates the common dynamic properties of business cycle fluctuations across countries regions and the world we employ a bayesian dynamic latent factor model to estimate common components in macroeconomic aggregates output consumption and investment in a 60 country sample covering seven regions of the world the results indicate that a common world factor is an important source of volatility for aggregates in most countries providing evidence for a world business cycle we find that region specific factors play only a minor role in explaining fluctuations in economic activity we also document similarities and differences across regions countries and aggregates jel f41 e32 c11 c32

work stoppages and the theory of the offset factor evidence from the british columbian lumber industry one method of estimating losses resulting from work stoppages is to multiply the total number of man days lost during disputes by the average product of workers this statistic can be easily calculated using information typically available from government agencies but has obvious flaws for example the behavior of other firms not involved in disputes is ignored moreover when output is durable the impact on consumption is unknown since inventories can be used as buffers to assess the importance of these and other considerations i develop an alternative empirical framework and implement it using data from the british columbian lumber industry

macroeconomic forecasting with mixed frequency data forecasting output growth in the united states many macroeconomic series such as u s real output growth are sampled quarterly although potentially useful predictors are often observed at a higher frequency we look at whether a mixed data frequency sampling midas approach can improve forecasts of output growth the midas specification used in the comparison uses a novel way of including an autoregressive term we find that the use of monthly data on the current quarter leads to significant improvement in forecasting current and next quarter output growth and that midas is an effective way to exploit monthly data compared with alternative methods

temporal aggregation of univariate and multivariate time series models a survey abstract we present a unified and up to date overview of temporal aggregation techniques for univariate and multivariate time series models explaining in detail although intuitively the technical machinery behind the results some empirical applications illustrate the main issues

forecasting gdp all over the world using leading indicators based on comprehensive survey data comprehensive and international comparable leading indicators across countries and continents are rare in this paper we use a free and instantaneous available source of leading indicators the if

transaction cost economics and cross national patterns of industrial conflict a comparative institutional analysis at the core of a capitalist system is an implied coalition between labor and capital built upon a system of exchange and compromise without capital the material condition upon which labor s interests are realized would be impossible likewise without labor s consent to exchange wages for future investment capital could not procure the profits and savings necessary for its reproduction and transformation organizing stable and cost efficient class coalitions has long been recognized as not merely an economic priority but a political challenge yet some democracies have met this challenge more successfully than others for the student of comparative political economy an enduring question remains why the present study is an attempt to provide an answer that complements and integrates the more common macroand microanalytic studies of industrial conflict it is argued here that a useful approach is to explicate some of the major microeconomic dynamics that condition exchanges between labor and capital and to demonstrate how institutional devices designed to accommodate political representation and conflict resolution facilitate or impede the process of class compromise by employing the logic of transaction cost economics the analysis highlights the comparative institutional elements fundamental to economizing on the costs of exchange shaping consensus within a political economy s industrial relations system the resulting transaction cost efficiency model of industrial conflict specifies the ex ante cost factors price margin of transaction and the institutional control of bounded rationality and the ex post cost factors legislative polarized pluralism executive hegemony and the frequency of general elections central to the process of building and sustaining class coalitions the model is tested on data drawn from 19 democracies covering the years 1965 83 use of simulation models reveals the relative trade offs associated with different patterns of ex ante and ex post cost structures

inventories and strikes this paper analyses a dynamic model of bargaining and strikes in which the reservation wage of union members in each period is private information the model endogenizes the firm s decision to accumulate inventories of finished goods in order to enhance its bargaining position with higher inventories the firm makes a lower wage offer thereby accepting an increased probability of a strike the model can help explain empirical results that have found a positive correlation between wages and inventory accumulation it also shows that unless inventories are controlled for strike incidence will exhibit a spurious negative state dependence

do financial variables help forecasting inflation and real activity in the euro area abstract this paper uses a large data set consisting of 447 monthly macroeconomic time series concerning the main countries of the euro area to simulate out of sample predictions of the euro area industrial production and the harmonized inflation index and to evaluate the role of financial variables in forecasting we considered two models which allow forecasting based on large panels of time series forni et al rev econom statist 82 2000 540 mimeo 2001b and stock and watson mimeo 1999 performance of both models were compared to that of a simple univariate ar model results show that multivariate methods outperform univariate methods for forecasting inflation at one three six and twelve months and industrial production at one and three months we find that financial variables do help forecasting inflation but do not help forecasting industrial production

short term interest rates as predictors of inflation on testing the hypothesis that the real rate of interest is constant in an innovative and provocative paper in this review eugene fama presents evidence which appears to be consistent with the joint hypothesis that the real rate of interest ignoring taxes is a constant and that the market for u s treasury bills is efficient in the sense of embodying rational expectations those findings are strikingly at variance with a long list of previous studies which seemed to support the view that the real rate of interest varies over time and can be related to economic variables such as real output monetary policy and so forth 2 the methodologies which lead to these contradictory conclusions are quite different previous studies had followed the lead of irving fisher by relating nominal interest rates to distributed lags on past rates of inflation 3 these distributed lags are generally interpreted as approximations to the market s expected rate of inflation and thus any remaining variation is attributed to variation in the real rate 4 fama s methodology on the other hand draws on the fact that the difference between the market interest rate and the subsequently observed rate of inflation the ex post real interest rate consists by definition of the ex ante real interest rate plus a pure forecasting error 5 the hypothesis of market efficiency implies that these forecasting errors must be serially random thus observing ex post real rates is equivalent to observing ex ante real rates with random measurement error these errors of course confound the problem of identifying variation in the ex ante real rate in this paper we will argue that the relative magnitude of these measurement errors is such that the tests carried out by fama were not powerful enough to reject the joint hypothesis that the ex ante real rate is a constant and expectations are rational more powerful tests which are presented in this paper using the same data do lead to rejection of that hypothesis of course rejection