tracking the slowdown in long run gdp growth using a dynamic factor model that allows for changes in both the long run growth rate of output and the volatility of business cycles we document a significant decline in long run output growth in the united states our evidence supports the view that most of this slowdown occurred prior to the great recession we show how to use the model to decompose changes in long run growth into its underlying drivers at low frequencies a decline in the growth rate of labor productivity appears to be behind the recent slowdown in gdp growth for both the united states and other advanced economies when applied to real time data the proposed model is capable of detecting shifts in long run growth in a timely and reliable manner

short run forecasting of the euro dollar exchange rate with economic fundamentals abstract we propose a fundamentals based econometric model for the weekly changes in the euro dollar rate with the distinctive feature of mixing economic variables quoted at different frequencies the model obtains good in sample fit and more importantly encouraging out of sample forecasting results at horizons ranging from one week to one month specifically we obtain statistically significant improvements upon the hard to beat random walk model using traditional statistical measures of forecasting error at all horizons moreover our model obtains a great improvement when we use the direction of change metric which has more economic relevance than other loss measures with this measure our model performs much better at all forecasting horizons than a naive model that predicts the exchange rate as an equal chance to go up or down with statistically significant improvements

a study on the future of unconventional oil development under different oil price scenarios a system dynamics approach abstract fluctuations in the oil global market has been a critical topic for the world economy so that analyzing and forecasting the conventional oil production rate has been examined by many researchers thoroughly however the dynamics of the market has not been studied systematically with regard to the new emerging competitors namely unconventional oil in this paper the future trend of conventional and unconventional oil production and capacity expansion rates are analyzed using system dynamics approach to do so a supply side modeling approach is utilized while main effective loops are modeled mathematically as follows technological learning and progress long and short term profitability of oil capacity expansion and production and oil proved reserve limitations the proposed model is used to analyze conventional and unconventional oil production shares up to 2025 under different oil price scenarios the results show that conventional oil production rate ranges from 79 995 to 87 044 mb day which is 75 80 percent of total oil production rate while unconventional oil production rate ranges from 19 615 to 28 584 mb day simulation results reveal that unconventional oil can gain a considerable market share in the short run although conventional oil will remain as the major source for the market in the long run

do better schools matter parental valuation of elementary education the evaluation of numerous school reforms requires an understanding of the value of better schools given the difficulty of calculating the relationship between school quality and student outcomes i turn to another method and use house prices to infer the value parents place on school quality i look within school districts at houses located on attendance district boundaries houses then differ only by the elementary school the child attends i thereby effectively remove the variation in neighborhoods taxes and school spending i find that parents are willing to pay 2 5 percent more for a 5 percent increase in test scores this finding is robust to a number of sensitivity checks

the effects of development constraints on forest management at the urban forest interface this article develops a model of a forest owner operating in a small open city environment where the rent for developed land is increasing concave in nearby preserved open space and is rising over time reflecting an upward trend in households income within this framework we examine how changes in nearby preserved open space and alternative development constraints affect an individual private landowner s decisions regarding both regeneration harvests and conversion dates we also examine how such policies affect development density once conversion from forestry to residential use occurs we show that when residential rents change over time the nature of the timber problem at the urban forest interface changes because it forces us to allow for the possibility of changes in land use from timber to residential use as a result the traditional faustmann setup is not suitable to study forest management decisions at this interface we also find that in the presence of rising income increases in permanently preserved open space hasten regeneration and conversion cuts of a neighboring parcel currently under forest use and leads to lower density development once conversion takes place compared to the case where income is constant we also find that both a binding development moratorium and a binding minimum lot size policy can postpone regeneration and conversion cut dates and thus help to protect open space even if only temporarily however the policies do not have the same effects on development density of converted forestland while the former leads to high density development the latter encourages low density development

an alternative to the standard spatial econometric approaches in hedonic house price models omitted misspecified or mismeasured spatially varying characteristics are a cause for concern in hedonic house price models spatial econometrics or spatial fixed effects have become popular ways of addressing these concerns we discuss the limitations of standard spatial approaches to hedonic modeling and demonstrate the spatial generalized additive model as an alternative parameter estimates for several spatially varying regressors are shown to be sensitive to the scale of the fixed effects and bandwidth dimension used to control for omitted variables this sensitivity reflects the uncertainty associated with the estimates when the appropriate spatial scale of the controls is unknown

a cointegration analysis of petroleum futures prices abstract this paper presents evidence concerning the number of common stochastic trends in a system of three petroleum futures prices crude oil heating oil and unleaded gasoline using daily data from 3 december 1984 to 30 april 1993 johansen s maximum likelihood approach for estimating long run relations in multivariate vector autoregressive models is used the results indicate the presence of only one common trend

exploring the core factors and its dynamic effects on oil price an application on path analysis and bvar tvp model abstract as the uncertainty of oil price increases impacts of the influential factors on oil price vary over time it is of great importance to explore the core factors and its time varying influence on oil price in view of this based on the path analysis model this paper obtains the core factors builds an oil price system var model which uses demand supply price and inventory as endogenous variables and china s net imports as well as dollar index as exogenous variables then we set up a bvar tvp time varying parameter model to analyze dynamic impacts of core factors on oil price the results show that 1 oil prices became more sensitive to oil supply changes and the influence delays became shorter 2 the impact of oil inventories on oil prices with a time lag of two quarters but has a downward trend 3 the impact of oil consumption on oil prices with a time lag of two quarters and this effect is increasingly greater 4 the us dollar index is always the important factor of oil price and its control power increases gradually and the financial crisis occurred in 2008 further strengthens the influence of us dollar

nowcasting mexico s short term gdp growth in real time a factor model versus professional forecasters we introduce a novel real time database for the mexican economy and propose a small scale mixed frequency dynamic factor model for nowcasting mexico s short term gdp growth in real time we compare our factor based backcasts nowcasts and forecasts with those of the consensus of the survey of professional forecasters during the period from the second quarter of 2008 through the second quarter of 2014 our results suggest that our factor based backcasts nowcasts and forecasts outperform those of the consensus of professional forecasters in real time comparisons despite some structural instability during the 2008 09 crisis and its aftermath in 2010

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

co2 emissions and economic activity a short to medium run perspective abstract this paper looks at the short to medium run impact of economic activity on co2 emissions in the united states shifting the existing focus away from the long run environmental kuznets curve ekc our novel methodological approach combines discrete wavelet transforms with dynamic factor models this allows us to i estimate economic and emissions cycles at different frequencies and ii let economic activity be estimated from many different economic variables rather than focussing on a small number as in existing studies from our results one might at first conclude that emissions are not linked to economic activity in the short run however when looking at the cycles uncovered at timescales of length one to three years we see that there are indeed strong linkages policymakers therefore cannot be exclusively long termist when evaluating the impact of economic policy on the environment

price movements and price discovery in futures and cash markets r isk transfer and price discovery are two of the major contributions of futures markets to the organization of economic activity working 1962 evans 1978 p 80 and silber 1981 risk transfer refers to hedgers using futures contracts to shift price risk to others price discovery refers to the use of futures prices for pricing cash market transactions working 1948 wiese 1978 p 87 and lake 1978 p 161 the significance of both contributions depends upon a close relationship between the prices of futures contracts and cash commodities this paper examines the characteristics of price movements in cash or spot markets and futures markets for storable commodities section ii presents an analytical model of simultaneous price dynamics which suggests that over short intervals of time the correlation of price changes is a function of the elasticity of arbitrage between the physical commodity and its counterpart futures contract greater elasticity fosters more highly correlated price changes and thereby facilitates the risk transfer function the elasticity of supply of arbitrage services is constrained by among other things storage and transaction costs thus futures contracts will not in general provide perfect risk transfer facilities over short time horizons the essence of the price discovery function of futures markets hinges on whether new information is reflected first in changed futures prices or in changed cash prices hoffman 1932 pp 258259 the model in section ii provides a framework for analyzing whether one market is dominant in terms of information flows and price discovery in section iii we develop a model based on section ii which is appropriate for estimating the lead lag relationship between cash prices and futures prices section iv presents empirical estimates of the parameters of the model for seven different storable commodities wheat corn oats frozen orange juice concentrates copper gold and silver the cost of arbitrage between cash and futures differs across these commodities for this reason we are not surprised to find inter commodity differences in the correlation of short run price changes and in the substitutability of futures contracts for cash market positions with respect to the price discovery function of futures markets we find that while futures markets dominate cash markets cash prices do not merely echo futures prices there are reverse information flows from cash markets to futures markets as well

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

does oil move equity prices a global view many studies indicate that oil price shocks have an adverse effect on real output and hence an adverse effect on corporate profits where oil is used as a key input the present study examines whether and to what extent the adverse effect of oil price shocks impacts stock market returns to this end we analyse 35 datastream global industry indices for the period from april 1983 to september 2005 our findings indicate that oil price rises have a negative impact on equity returns for all sectors except mining and oil and gas industries generally these results are consistent with economic theory and evidence provided by previous empirical studies little evidence of any asymmetry is detected in the oil price sensitivities in light of our findings we recommend that international portfolio investors consider hedging oil price risk

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

okun s law and productivity innovations a long tradition in macroeconomics dating back to arthur okun 1965 and walter oi 1962 regards cyclical productivity fluctuations as an artifact a residual generated from the incomplete and lagged response of employment and labor hours to demand driven fluctuations in real output in okun s version a one percent decline in output relative to trend is divided up into a reduction of 1 3 point in productivity and 2 3 point in aggregate hours the latter is further subdivided into a reduction of 1 3 point in the employment rate with the remaining adjustment taking the form of lower hours per employee and in the labor force participation rate hereafter lfpr yet this tradition of regarding cyclical productivity fluctuations as a byproduct of demand driven output cycles has been almost forgotten over the past three decades as a result of widespread adoption of the real business cycle rbc model in which productivity shocks are treated as exogenous as unexplained as unrelated to aggregate demand and as the sole driver of business cycles even in the more enlightened modern macro work on dynamic stochastic general equilibrium models aggregate demand and sticky prices have reappeared but most recent papers still include an autonomous technology shock as one of several causes of short term business cycle fluctuations revisiting and rethinking the business cycle

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

the value of agricultural water rights in agricultural properties in the path of development article i nfo article history this paper estimates the value of water rights in a rapidly urbanizing semi arid area phoenix arizona to do this we use hedonic pricing to explore the impact of water rights on property values in 151 agricultural land transactions that occurred between 2001 and 2005 we test two main hypotheses 1 that the marginal will ingness to pay for water rights is higher in more developed urbanizing areas than in less developed rural areas and 2 that the marginal willingness to pay for water rights in urban areas is increasing in the value of developed land we find that the marginal willingness to pay for water rights is highest among properties in urbanized or urbanizing areas where a significant proportion of the land has already been developed additionally we find that the marginal willingness to pay for agricultural water rights is greatest in cities where developed land is most valuable

the value of water as an urban club good a matching approach to community provided lakes abstract community provided urban lakes located in arid environments provide significant amenities to residents but require large quantities of water to maintain lake levels we use matching techniques to recover the average capitalized value of lakes above the costs of maintenance by comparing transactions in lake communities to observationally similar transactions in surrounding communities we differentiate between adjacent and non adjacent houses to recover heterogeneous treatment effects and allow estimates to vary across communities importantly we consider the role of imperfect matching on spatially and temporally varying unobservable variables in our choice of estimator and the appropriate set of potential control properties our results suggest that the capitalized value of lakes is heterogeneous with a mean estimate of 6500 an acre foot our results provide estimates of the changes in water prices that would make this form of development unprofitable illustrating the linkage between water pricing policy and the water intensity of development

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

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

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

crack spread hedging accounting for time varying volatility spillovers in the energy futures markets crude oil heating oil and unleaded gasoline futures contracts are simultaneously analysed for their effectiveness in reducing price volatility for an energy trader a conceptual model is developed for a trader hedging the crack spread various hedge ratio estimation techniques are compared to a multivariate garch model that directly incorporates the time to maturity effect often found in futures markets modelling of the time variation in hedge ratios via the multivariate garch methodology and thus taking into account volatility spillovers between markets is shown to result in significant reductions in uncertainty even while accounting for trading costs copyright 2002 john wiley sons ltd

the dynamics of a nonlinear relationship between crude oil spot and futures prices a multivariate threshold regression approach abstract this paper segments daily data from january of 1986 to april of 2007 into three periods based on certain important events both periods i and ii indicate that the spot prices in general are higher than futures prices as was well known in the literature only period iii 2001 9 11 2007 4 30 displays a reverse phenomenon futures prices in general exceed spot prices when the absolute value of a basis futures spot is greater than the threshold value in the arbitrage area regime 1 and 3 at least one of the error correction coefficients representing adjustment towards equilibrium is statistically significant that is there exists a tendency in the oil market in which prices move toward equilibrium with respect to the short run dynamic interaction between spot price change st and futures price change ft our results indicate that when the spot price is higher than futures price and the basis is less than certain threshold value regime 3 there exists at least one causal relationship between st and ft conversely when the futures price is higher than spot price and the basis is higher than certain threshold value regime 1 there exists at least one causal relationship between st and ft finally we use the method suggested by diebold and mariano diebold francis x mariano roberto s 1995 comparing predictive accuracy journal of business and economic statistics 13 3 253 263 to compare the predictive power between the linear and nonlinear models our empirical results indicate that the in sample prediction of the nonlinear model is clearly superior to that of the linear model

euromind d a density estimate of monthly gross domestic product for the euro area euromind d is a density estimate of monthly gross domestic product gdp constructed according to a bottom up approach pooling the density estimates of eleven gdp components by output and expenditure type the components density estimates are obtained from a medium size dynamic factor model of a set of coincident time series handling mixed frequencies of observation and ragged edged data structures they reflect both parameter and filtering uncertainty and are obtained by implementing a bootstrap algorithm for simulating from the distribution of the maximum likelihood estimators of the model parameters and conditional simulation filters for simulating from the predictive distribution of gdp both algorithms process sequentially the data as they become available in real time the gdp density estimates for the output and expenditure approach are combined using alternative weighting schemes and evaluated with different tests based on the probability integral transform and by applying scoring rules

speculation in international crises report from the gulf recent years have seen recurring international financial crises as well as a tremendous rise in trading and speculation how are the two related are speculators and trading responsible for market volatility this paper presents a study of the gulf crisis of 1990 1991 examining the behavior of the international oil market during a period of unprecedented volatility the analysis suggests that a combination of political events and market fundamentals rather than trading was behind this volatility

drift and breaks in labor productivity abstract we use endogenous break tests and the stock watson tvp mub methodology to investigate changes in the equilibrium rate of growth of labor productivity in the u s the eurozone the u k australia and japan since wwii results for the u s well capture the conventional wisdom of a golden era of high productivity growth the 1950s and 1960s a marked deceleration starting from the beginning of the 1970s and a strong growth resurgence starting from mid 1990s results for the eurozone point towards a deceleration since the early 1980s with the equilibrium rate of growth of output per hour falling to 0 9 in 2004 4

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

the quiet revolution that transformed women s employment education and family the modern economic role of women emerged in four phases the first three were evolutionary the last was revolutionary phase i occurred from the late nineteenth century to the 1920s phase ii was from 1930 to 1950 phase iii extended from 1950 to the late 1970s and phase iv the quiet revolution began in the late 1970s and is still ongoing three aspects of women s choices distinguish the evolutionary from the revolutionary phases horizon identity and decision making the evolutionary phases are apparent in time series data on labor force participation the revolutionary phase is discernible using time series evidence on women s more predictable attachment to the workplace greater identity with career and better ability to make joint decisions with their spouses each of these series has a sharp break or inflection point signifying social and economic change these changes moreover coincide by birth cohort or period the relationship between the development of modern labor economics and the reality of women s changing economic role is explored the paper concludes by assessing whether the revolution has stalled or is being reversed women who graduated college in the early 1980s did not opt out but recent cohorts are too young to evaluate this abstract was borrowed from another version of this item

on the choice of funtional form for hedonic price functions this study examines how errors in measuring marginal attribute pric es vary with the form of the hedonic price function in simulations consumers with known utility functions bid for houses with given attributes various forms of the hedonic function are estimated using equilibrium housing prices errors in estimating marginal attribute prices are calculated by comparing each consumer s equilibrium marginal bid vector with the gradient of the hedonic function when all attributes are observed linear and quadratic box cox forms produce lowest mean percentage errors however when some attributes are unobserved or are replaced by proxies linear and linear box cox functions perform best copyright 1988 by mit press

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

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

the quest for prosperity without inflation abstract in recent years activist monetary policy rules responding to inflation and the level of economic activity have been advanced as a means of achieving effective output stabilization without inflation advocates of such policies suggest that their flexibility may yield substantial stabilization benefits while avoiding the excesses of overzealous discretionary fine tuning such as is thought to characterize the experience of the 1960s and 1970s in this study i present evidence suggesting that these conclusions are misguided using an estimated model i show that when informational limitations are properly accounted for activist policies would not have averted the great inflation but instead would have resulted in worse macroeconomic performance than the actual historical experience the problem can be attributed in large part to the counterproductive reliance of these policies on the output gap the analysis suggests that the dismal economic outcomes of the great inflation may have resulted from an unfortunate pursuit of activist policies in the face of bad measurement specifically overoptimistic assessments of the output gap associated with the productivity slowdown of the late 1960s and early 1970s

the causal nexus between oil prices and equity market in the u s a regime switching model abstract the aim of this paper is to analyse the causal link between monthly oil futures price changes and a sub grouping of s p 500 stock index changes the causal linkage between oil and stock markets is modelled using a vector autoregressive model with time varying parameters so as to reflect changes in granger causality over time a markov switching vector autoregressive ms var model in which causal link between the series is stochastic and governed by an unobservable markov chain is used for inferring time varying causality although we do not find any lead lag type granger causality the results based on the ms var model clearly show that oil futures price has strong regime prediction power for a sub grouping of s p 500 stock index during various sub periods in the sample while there is a weak evidence for the regime prediction power of a sub grouping of s p 500 stock indexes the regime prediction non causality tests on the ms var model show that both variables are useful for making inference about the regime process and that the evidence on regime prediction causality is primarily found in the equation describing a sub grouping of s p 500 stock market returns the evidence from the conditional non causality tests shows that past information on the other series fails to improve the one step ahead prediction for both oil futures and stock returns

house prices during siting decision stages the case of an incinerator from rumor through operation abstract the impact of an undesirable land use on house prices is not constant over time previous proximity studies which employed only discrete changes in information such as an epa superfund site announcement ignored potentially important phases of the adjustment process this study explicitly measures how the effects of an undesirable land use evolve over the siting process and life of the disamenity some price response to rumors of a facility is indicated and the evidence that prices respond at groundbreaking before operation is strong the distance premium persists at least 7 years after the facility begins operations

a further analysis of the lead lag relationship between the cash market and stock index futures market the intraday lead lag relation between returns of the major market cash index and returns of the major market index futures and s p 500 futures is investigated empirical results show strong evidence that the futures leads the cash index and weak evidence that the cash index leads the futures the asymmetric lead lag relation holds between the futures and all component stocks including those that trade in almost every five minute interval evidence indicates that when more stocks move together market wide information the futures leads the cash index to a greater degree this suggests that the futures market is the main source of market wide information article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

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

measuring the international dimension of output volatility abstract this paper studies output fluctuations in a panel of oecd economies with the aim to decompose the evolution in output volatility into domestic and international factors to this end we use a factor augmented dynamic panel model with both domestic and international shocks and spillovers between countries through trade linkages changes in the volatility of output growth can be due to time varying sensitivity to these shocks changes in the propagation mechanism or shifts in the variances of shocks we explicitly model cross sectional dependence in the variance equation by specifying a common factor structure in the volatility of domestic shocks the results show that while the size of international shocks and spillovers does not decrease in most countries the volatilities of domestic shocks share a clear common decreasing trend hence the great moderation appears to be mainly driven by a decline in the volatility of domestic shocks rather than smaller international shocks

trends and cycles in macroeconomic time series two structural time series models for annual observations are constructed in terms of trend cycle and irregular components the models are then estimated via the kalman filter using data on five u s macroeconomic time series the results provide some interesting insights into the dynamic structure of the series particularly with respect to cyclical behavior at the same time they illustrate the development of a model selection strategy for structural time series models

estimating and forecasting the real prices of crude oil a data rich model using a dynamic model averaging dma approach given that oil price fluctuations have been of great interest for macroeconomics in the recent years due to its important implications for future inflation economic growth and policy making the aim of this paper is to estimate and forecast west texas intermediate wti crude oil prices using a large monthly dataset that covers the period from march 1983 to december 2011 to achieve this aim forecasting with factor models offers a usual approach that utilizes large datasets however a forecasting model which simply includes all factors in state space equation and does not allow for time varying may be not suitable with a highly volatile market such as oil market to overcome these limitations an approach that accounts both for parameter and model uncertainty is employed in particular this study uses the dynamic model averaging dma approach suggested by koop and korobilis 2012 the key element of the dma approach is that it allows both for model and parameter to vary at each point of time by doing so the dma is robust to structural breaks empirical findings show that dma approach outperforms any other alternative model used in the forecasting exercise results also show that there is model but not parameter variation in this oil price forecasting exercise finally the findings suggest that the dma approach provides a better proxy of expected spot prices than future prices

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

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

price discovery in oil markets a time varying analysis of the 1990 1991 gulf conflict abstract this study examines the behaviour of crude oil spot and futures markets in the uk and usa during the 1990 1991 gulf conflict the objective is to investigate the relative ability of spot and futures markets to impound information this is achieved with the use of a generalized model of price discovery which represents a synthesis of the two most commonly used methodologies in its field emphasis is placed on the time varying nature of price discovery relationships results indicate that such relationships are strongly temporal these findings offer new insights into the nature of relationships between spot and futures markets

regional output growth in the united kingdom more timely and higher frequency estimates from 1970 output growth estimates for the regions of the uk are currently published at the annual frequency only and are released with a long delay regional economists and policymakers would benefit from having higher frequency and more timely estimates in this paper we develop a mixed frequency vector autoregressive mf var model and use it to produce estimates of quarterly regional output growth temporal and cross sectional restrictions are imposed in the model to ensure that our quarterly regional estimates are consistent with the annual regional observations and the observed quarterly uk totals we use a machine learning method based on the hierarchical dirichlet laplace prior to ensure optimal shrinkage and parsimony in our over parameterised mf var thus this paper presents a new regional quarterly database of nominal and real gross value added dating back to 1970 we describe how we update and evaluate these estimates on an ongoing quarterly basis to publish online at www escoe ac uk regionalnowcasting more timely estimates of regional economic growth we illustrate how the new quarterly data can be used to contribute to our historical understanding of business cycle dynamics and connectedness between regions

price discount inventories and the distortion of wti benchmark abstract applying a rolling estimation to the hasbrouck information share model this study investigates the changing status of wti benchmark over time results show the ability of wti in reflecting market conditions decreases sharply and wti s efficiency in processing information has been surpassed by brent s since the second half of 2004 in the short run the wti distortion is related to its price discount problem but the distortion cannot be indicated by contangos in the long run wti s price discount problem coexists with a positive forward curve and both have harmed the price discovery role of wti the rising inventories in cushing significantly deteriorate wti s ability in serving as a world benchmark

an embarrassment of riches confronting omitted variable bias and multiscale capitalization in hedonic price models abstract many researchers have addressed concerns of omitted variable bias in hedonic price models through the use of spatial fixed effects we argue that this approach does not consider the biases introduced by effects that overlap the zone of capitalization for nonmarket goods we show this bias can dominate the usual omitted variable bias using data on developer provided open space we control for multiscale capitalization and omitted variables simultaneously by extending the hausman taylor estimator where the panel component of the estimator is defined over repeated transactions within neighborhoods rather than the traditional definition following a unique cross sectional unit through time

is it one break or ongoing permanent shocks that explains u s real gdp the relative importance of permanent versus cyclical shocks to gdp has been found to depend on the presence or absence of a single break in mean growth we estimate unobserved components models conditional on a trend break having occurred in any specified quarter and use the bayesian model averaging to combine the conditional estimates we estimate a break occurred around 2006 1 allowing for a break significantly reduces estimates of trend variance however enough spread remains in the posterior distribution to indicate that available data does not definitively settle the question of the relative importance of trend versus cycle

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

valuing open space in a residential sorting model of the twin cities abstract we present an analysis of how open space amenities affect residential location choices using a horizontal sorting model to estimate household preferences for open space to parameterize the model a new and rich dataset spanning 17 years of home sales in the seven county twin cities area of minnesota was assembled heterogeneity across types of open space and across households is shown to be a critical determinant of the welfare impacts of open space conservation our general equilibrium simulations allow housing prices to re equilibrate in response to policy induced demand shifts demonstrating that as the scale of intervention becomes larger general equilibrium and partial equilibrium welfare measures increasingly diverge finally we find that the spatial structure of policy is an important component of policy design suggesting open space policy should be place specific in its design and implementation

the franc shock and swiss gdp how long does it take to start feeling the pain abstractthe article addresses the question on what is the typical time horizon over which a full transmission of movements in the real exchange rate takes place into real economy we base our analysis on the mixed frequency small scale dynamic factor model dfm proposed by siliverstovs in 2012 fitted to the swiss data in this article we augment the benchmark model with the real exchange rate of the swiss franc vis a vis currencies of its 24 trading partners while keeping the rest of model specification intact we are interested in investigating the relationship between the common latent factor representing the swiss business cycle and the real exchange rate we explore the temporal relationship between these two variables by varying the time lag with which the real exchange rate enters the factor model by recording the magnitude and statistical significance of the factor loading coefficient in the equation pertaining to the real exchange rate variable our main conclusion is that the fluctuations in

fluctuations in uncertainty this review article tries to answer four questions i what are the stylized facts about uncertainty over time ii why does uncertainty vary iii do fluctuations in uncertainty matter and iv did higher uncertainty worsen the great recession of 2007 2009 on the first question both macro and micro uncertainty appears to rise sharply in recessions on the second question the types of exogenous shocks like wars financial panics and oil price jumps that cause recessions appear to directly increase uncertainty and uncertainty also appears to endogenously rise further during recessions on the third question the evidence suggests uncertainty is damaging for short run investment and hiring but there is some evidence it may stimulate longer run innovation finally in terms of the great recession the large jump in uncertainty in 2008 potentially accounted for about one third of the drop in gdp

the sources of growth in a technologically progressive economy the united states 1899 1941 we develop new aggregate tfp growth estimates for the united states between 1899 and 1941 and sectoral estimates at the most disaggregated level so far 38 industries we include hard to measure services and a refined measure of sectoral labour quality growth the resulting dataset supersedes kendrick 1961 showing tfp growth lower than previously thought broadly based across industries and strongly variant intertemporally the four great inventions that gordon 2016 highlighted were important but less dominant in tfp growth than their predecessors in the british industrial revolution the findings also make it unlikely the 1930s had the twentieth century s highest tfp growth

metro business cycles abstract we construct monthly economic activity indices for the 50 largest u s metropolitan statistical areas msas beginning in 1990 each index is derived from a dynamic factor model based on twelve underlying variables capturing various aspects of metro area economic activity to accommodate mixed frequency data and differences in data publication lags we estimate the dynamic factor model using a maximum likelihood approach that allows for arbitrary patterns of missing data our indices highlight important similarities and differences in business cycles across msas while a number of msas experience sizable recessions during the national recessions of the early 1990s and early 2000s other msas escape recessions altogether during one or both of these periods nearly all msas suffer relatively deep recessions near the recent great recession but we still find significant differences in the depth of recent metro recessions we relate the severity of metro recessions to a variety of msa characteristics and find that msas with less educated populations and less elastic housing supplies experience significantly more severe recessions after controlling for national economic activity we also find significant evidence of dynamic spillover effects in economic activity across msas

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

learning and shifts in long run productivity growth abstract an extensive literature has analyzed the macroeconomic effects of shocks to the level of aggregate productivity however there has been little corresponding research on sustained shifts in the growth rate of productivity in this paper we examine the effects of shocks to productivity growth in a dynamic general equilibrium model where agents do not directly observe whether shocks are transitory or persistent we show that an estimated kalman filter model using real time data describes economists long run productivity growth forecasts in the united states extremely well and that filtering has profound implications for the macroeconomic effects of shifts in productivity growth

let s take a break trends and cycles in us real gdp abstract trend cycle decompositions for us real gdp such as the unobserved components models the beveridge nelson decomposition the hodrick prescott filter and others yield very different cycles which bear little resemblance to the nber chronology ascribes much movements to the trend leaving little to the cycle and some imply a negative correlation between the noise to the cycle and the trend we argue that these features are artifacts created by the neglect of a change in the slope of the trend function once this is accounted for all methods yield the same cycle with a trend that is non stochastic except for a few periods around 1973 the cycle is more important in magnitude than previously reported and it accords well with the nber chronology our results are corroborated using an alternative trend cycle decomposition based on a generalized unobserved components models with errors having a mixture of normals distribution for both the slope of the trend function and the cyclical component

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

is all space created equal uncovering the relationship between competing land uses in subdivisions abstract evaluating the importance of different forms of open space to households requires an evaluation of the service flows provided by each type of open space for many non market goods these flows occur over multiple spatial scales and require analysis that simultaneously accounts for capitalization at each scale to meet this often overlooked need we apply a newly developed extension to the hausman taylor model that treats multiple housing transactions occurring in a spatial location as a panel this methodology allows us to account for omitted variables within a subdivision while instrumenting for variables identified through differences between subdivisions we measure capitalization of open space at three distinct spatial extents adjacency walkability and subdivision wide we find that the interactions between subdivision open space and private open space in the form of lot size change from complementarity at small scales to substitutability at large scales these results confirm much of the intuition developed by ecologists and public planners on the likely service flows associated with open space and show how our approach to accounting for multiple spatial scales of capitalization in the evaluation of non market goods could be beneficial to other areas of applied research

short term forecasting with mixed frequency data a midasso approach abstractin this article we extend the targeted regressor approach suggested in bai and ng 2008 for variables sampled at the same frequency to mixed frequency data our midasso approach is a combination of the unrestricted mixed frequency data sampling approach u midas see foroni et al 2015 castle et al 2009 bec and mogliani 2013 and the lasso type penalized regression used in bai and ng 2008 called the elastic net zou and hastie 2005 we illustrate our approach by forecasting the quarterly real gdp growth rate in switzerland

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

long run implications of investment specific technological change an attempt is made to disentangle its effects from the more traditional hicksneutral form of technological progress the balanced growth path for the model is characterized and calibrated to u s national income and product account nipa data the quantitative analysis suggests that investment specific technological change accounts for the major part of growth jel e13 030 041 047

the cyclical component of u s economic activity quarterly data on industrial production and deflated gross national product in the united states from 1947 through 1985 are decomposed into independent nonstationary trend and stationary cycle components using kalman filtering and smoothing techniques estimates of the model parameters imply that at least half of the quarterly innovation in u s economic activity can be attributed to a stationary cyclical component that persists over periods of time as long as five years this finding is inconsistent with the hypothesis that most of the apparent variation in u s economic activity can be attributed to a nonstationary trend component

evidence of the effects of water quality on residential land prices we use hedonic techniques to show that water quality has a significant effect on property values along the chesapeake bay we calculate the potential benefits from an illustrative but limited water quality improvement and we calculate an upper bound to the benefits from a more widespread improvement many environmental hedonic studies have almost entirely ignored the potential for omitted variables bias the possibility that pollution sources in addition to emitting undesirable substances are likely to be unpleasant neighbors we discuss the implications of this oversight and we provide an application that addresses this potential problem o 2000 acadcmic prcss

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

combining time variation and mixed frequencies an analysis of government spending multipliers in italy summary in this paper we propose a time varying parameter vector autoregression var model with stochastic volatility which allows for estimation on data sampled at different frequencies our contribution is twofold first we extend the methodology developed by cogley and sargent drifts and volatilities monetary policies and outcomes in the post wwii u s review of economic studies 2005 8 262 302 and primiceri time varying structural vector autoregressions and monetary policy review of economic studies 2005 72 821 852 to a mixed frequency setting in particular our approach allows for the inclusion of two different categories of variables high frequency and low frequency into the same time varying model second we use this model to study the macroeconomic effects of government spending shocks in italy over the 1988 q4 2013 q3 period italy as well as most other euro area economies is characterized by short quarterly time series for fiscal variables whereas annual data are generally available for a longer sample before 1999 our results show that the proposed time varying mixed frequency model improves on the performance of a simple linear interpolation model in generating the true path of the missing observations second our empirical analysis suggests that government spending shocks tend to have positive effects on output in italy the fiscal multiplier which is maximized at the 1 year horizon follows a u shape over the sample considered it peaks at around 1 5 at the beginning of the sample it then stabilizes between 0 8 and 0 9 from the mid 1990s to the late 2000s before rising again to above unity during the recent crisis copyright 2015 john wiley sons ltd

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

commodity booms and busts in emerging economies abstract emerging economies particularly those dependent on commodity exports are prone to highly disruptive economic cycles this paper proposes a small open economy model for a net commodity exporter to quantitatively study the triggers of these cycles the economy consists of two sectors one of which produces commodities with prices subject to exogenous international fluctuations these fluctuations affect both the competitiveness of the economy and its borrowing terms as higher commodity prices are associated with lower spreads between the country s borrowing rate and world interest rates both effects jointly result in strongly positive effects of commodity price increases on gdp consumption and investment and a negative effect on the total trade balance furthermore they generate excess volatility of consumption over output and a large volatility of investment besides explicitly incorporating a double role of commodity prices the model structure nests the various candidate sources of shocks proposed in previous work on emerging economy business cycles estimating the model on argentine data we find that the contribution of commodity price shocks to fluctuations in post 1950 output growth is in the order of 38 in addition commodity prices account for around 42 and 61 of the variation in consumption and investment growth respectively we find transitory productivity shocks to be an important driver of output fluctuations exceeding the contribution of shocks to the trend which though smaller is not negligible

the effect of the financial sector on the evolution of oil prices analysis of the contribution of the futures market to the price discovery process in the wti spot market abstract the aim of this article is to empirically measure the contribution of the futures market to the price discovery process in the spot market for benchmark crude oils specifically that for west texas intermediate wti for this purpose we test the hypothesis that the recent evolution of the financial markets has affected the future oil market so as to increase its contribution to the price discovery process of the spot market we modeled the relation between wti spot and future prices as a cointegration relation by using the kalman filter technique it was possible to obtain a time varying measure of the contribution of future markets to the price discovery mechanism the results show that in the case of wti the contribution of the futures market has been increasing especially between 2003 and 2008 and then again after the start of 2009 evidencing the growing importance of factors particular to the financial markets in determining oil prices in recent years during 2009 the spot prices adjusted to agents future expectations rather than to the current supply and demand conditions

toward a more reliable picture of the economic activity an application to argentina abstract we advocate a dynamic factor model to provide alternative measures of output data using indirect information from economic indicators we apply the method to show evidence of a significant gap between estimated and official measures of argentine gdp since 2007

hedgers funds and small speculators in the energy futures markets an analysis of the cftc s commitments of traders reports the commodity futures trading commission cftc s commitments of traders cot data are examined for crude oil unleaded gasoline heating oil and natural gas futures contracts the collection procedures for the cot data are first examined followed by granger causality tests to determine if relationships between trader positions and market prices exist a positive correlation between returns and positions held by noncommercial traders and a negative correlation between commercial positions and market returns are found furthermore positive returns result in an increase in noncommercial net positions in the following week whereas the net long positions held by commercial hedgers decline following price increases however traders net positions do not lead market returns in general

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

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

choices and the value of natural capital sustainability requires maintaining opportunities for future generations so they can meet their needs opportunities are passed to future generations through a set of capital assets nature provides an important class of these assets but markets seldom reveal the marginal value of natural capital rather the marginal social worth or asset price must be imputed based on intertemporal exchange in the context of assessing whether intertemporal allocation rules lead to sustainable development appropriate asset prices must be based on the actual allocations and trade offs society makes therefore measuring economic programmes that enable the measurement of asset prices is an important empirical task we review the theory of measuring natural capital asset prices and discuss the key elements of measuring economic programmes that enable the measurement of natural capital asset prices we place the measurement of economic programmes and natural capital asset prices in the context of wealth based sustainability metrics