the drivers of international migration to the uk a panel based bayesian model averaging approach a heterogeneous panel based bayesian model averaging approach is used to identify the robust economic and policy drivers of international migration to the uk from 14 different source regions over 1980 2007 around three quarters of the increase in net immigration over the last decade which is particularly pronounced for selected source regions is associated with structural change which may be attributed to uk and foreign immigration policy the remainder of the rise is largely explained by friends and family effects there are considerable uncertainties associated both with the effects of particular economic drivers of immigration and with forecasts of immigration

asymmetric forecast densities for u s macroeconomic variables from a gaussian copula model of cross sectional and serial dependence most existing reduced form macroeconomic multivariate time series models employ elliptical disturbances so that the forecast densities produced are symmetric in this article we use a copula model with asymmetric margins to produce forecast densities with the scope for severe departures from symmetry empirical and skew t distributions are employed for the margins and a high dimensional gaussian copula is used to jointly capture cross sectional and multivariate serial dependence the copula parameter matrix is given by the correlation matrix of a latent stationary and markov vector autoregression var we show that the likelihood can be evaluated efficiently using the unique partial correlations and estimate the copula using bayesian methods we examine the forecasting performance of the model for four u s macroeconomic variables between 1975 q1 and 2011 q2 using quarterly real time data we find that the point and density forecasts from the copula model are competitive with those from a bayesian

price density forecasts in the u s hog markets composite procedures we develop and evaluate quarterly out of sample individual and composite density forecasts for u s hog prices individual density forecasts are generated using time series models and the implied distributions of usda and iowa state university outlook forecasts composite density forecasts are constructed using linear and logarithmic combinations of the individual forecasts and several weighting schemes density forecasts are evaluated on predictive accuracy sharpness goodness of fit calibration and their economic value in a hedging simulation logarithmic combinations using equal and mean square error weights outperform all individual density forecasts and are modestly better than linear composites comparison of the outlook forecasts to the best composite demonstrates the usefulness of the composite procedure and identifies the economic value that more accurate expected price probability distributions can provide to producers

real time density forecasts from bayesian vector autoregressions with stochastic volatility central banks and other forecasters are increasingly interested in various aspects of density forecasts however recent sharp changes in macroeconomic volatility including the great moderation and the more recent sharp rise in volatility associated with increased variation in energy prices and the deep global recession pose significant challenges to density forecasting accordingly this paper examines with real time data density forecasts of u s gdp growth unemployment inflation and the federal funds rate from bayesian vector autoregression bvar models with stochastic volatility the results indicate that adding stochastic volatility to bvars materially improves the real time accuracy of density forecasts this article has supplementary material online

a test of lazear s theory of delayed payment contracts according to lazear workers and firms enter into long term implicit contracts that discourage shirking and malfeasance by shifting compensation to the end of the contract such delayed payment contracts are less likely to occur in jobs in which it is comparatively simple to monitor worker effort this paper uses data from the national longitudinal survey and the dictionary of occupational titles to test that hypothesis in particular it tests whether jobs that involve repetitive tasks tend to be characterized by an absence of pensions mandatory retirement long job tenures and high wages for older workers

are those paid more really more productive the case of experience this study uses computerized personnel microdata on the white male managerial and professional employees at a major u s corporation to address the following question can the additional earnings which are associated with more labor market experience at a point in time really be explained by higher productivity at the same point in time our answer to this question based on both cross sectional and longitudinal information is that performance plays a substantially smaller role in explaining cross sectional experience earnings differentials and earnings growth than is claimed by those who have adopted the human capital explanation of the experience earnings profile this response depends critically on our assumption that the performance ratings which supervisors give to their white male managerial and professional subordinates adequately reflect the subordinates relative productivity in the year of assessment we present a great deal of evidence which strongly supports this assumption

macroeconomic forecasting and structural change the aim of this paper is to assess whether explicitly modeling structural change increases the accuracy of macroeconomic forecasts we produce real time out of sample forecasts for inflation the unemployment rate and the interest rate using a time varying coefficients var with stochastic volatility tv var for the us the model generates accurate predictions for the three variables in particular for inflation the tv var outperforms in terms of mean square forecast error all the competing models fixed coefficients vars time varying ars and the na ove random walk model these results are also shown to hold over the period commonly referred to as the great moderation

evaluating the bank of england density forecasts of inflation we consider evaluating the uk monetary policy committee s inflation density forecasts using probability integral transform goodness of fit tests these tests evaluate the whole forecast density we also consider whether the probabilities assigned to inflation being in certain ranges are well calibrated where the ranges are chosen to be those of particular relevance to the mpc given its remit of maintaining inflation rates in a band around per annum finally we discuss the decision based approach to forecast evaluation in relation to the mpc forecasts

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

real time inflation forecasting in a changing world this article revisits the accuracy of inflation forecasting using activity and expectations variables we apply bayesian model averaging across different regression specifications selected from a set of potential predictors that includes lagged values of inflation a host of real activity data term structure data relative price data and surveys in this model average we can entertain different channels of structural instability by either incorporating stochastic breaks in the regression parameters of each individual specification within this average or allowing for breaks in the error variance of the overall model average or both thus our framework simultaneously addresses structural change and model uncertainty that would unavoidably affect any inflation forecast model the different versions of our framework are used to model u s personal consumption expenditures pce deflator and gross domestic product gdp deflator inflation rates for the 1960 2011 period a real time inflation forecast

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

macroeconomic forecasting performance under alternative specifications of time varying volatility summary this paper compares alternative models of time varying volatility on the basis of the accuracy of real time point and density forecasts of key macroeconomic time series for the usa we consider bayesian autoregressive and vector autoregressive models that incorporate some form of time varying volatility precisely random walk stochastic volatility stochastic volatility following a stationary ar process stochastic volatility coupled with fat tails garch and mixture of innovation models the results show that the ar and var specifications with conventional stochastic volatility dominate other volatility specifications in terms of point forecasting to some degree and density forecasting to a greater degree copyright 2014 john wiley sons ltd

combining forecast densities from vars with uncertain instabilities recursive weight forecast combination is often found to an ineffective method of improving point forecast accuracy in the presence of uncertain instabilities we examine the effectiveness of this strategy for forecast densities using many vector autoregressive var and autoregressive ar models of output growth inflation and interest rates our proposed recursive weight density combination strategy based on the recursive logarithmic score of the forecast densities produces well calibrated predictive densities for us real time data by giving substantial weight to models that allow for structural breaks in contrast equal weight combinations produce poorly calibrated forecast densities for great moderation data copyright 2010 john wiley sons ltd

the impact of human capital investments on pension benefits this article develops a model with deferred compensation and severance pay that predicts that workers bear all the costs and receive all the returns of human capital investments and that specific investments yield higher returns than general investments this model also predicts that pensions which efficiently defer compensation will be positively related to specific investments evidence from the national longitudinal survey of older men confirms these predictions participation in company sponsored training programs proxying for specific investments increases the probability of pension receipt and the level of benefits more general training outside the firm has much smaller effects on pensions

the role of pensions in the labor market a survey of the literature because employer sponsored group pension plans entail agreements between workers and their employers explicitly linking future payment and employment they offer an unusual window into long term employment relationships this review of recent research on pensions explores how pensions influence employee compensation retirement turnover and other matters central to the determination of labor s price and quantity over time the authors also outline some unanswered questions and difficult to reconcile findings because the pension promise involves an explicit and relatively well documented set of statements regarding future contingent payment and employment an examination of the design and operation of employersponsored group pension plans can yield important insights into the long term employment relationship specifically pension research illuminates some important labor market questions in two ways it offers insight into an important element of compensation in its own right and it furthers our understanding of labor markets in which long term

evaluating density forecasts with applications to financial risk management density forecasting is increasingly more important and commonplace for example in financial risk management yet little attention has been given to the evaluation of density forecasts the authors develop a simple and operational framework for density forecast evaluation they illustrate the framework with a detailed application to density forecasting of asset returns in environments with time varying volatility finally the authors discuss several extensions copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

economic determinants of workers retirement decisions economic determinants of workers retirement decisions the landscape for older workers has changed dramatically in recent decades governments have made cuts to public pension programs private pensions have shifted from defined benefit to defined contribution plans equity and housing markets have been unusually volatile and workers have experienced declining morbidity and mortality at the same time the labor force participation rate for older men and women has been rising over the past two decades implying later retirement are these phenomena related this paper reviews the large and growing body of literature exploring the economic determinants of workers retirement decisions including public and private pensions wealth and savings health and health insurance and labor demand

pension coverage and borrowing constraints using data from the 1983 survey of consumer finances and taking a measure of borrowing constraint status as an indication of a worker s discount rate we find evidence that borrowing constrained workers are less likely to be covered by a pension plan and that the borrowing constraint effect is significant only for defined benefit plans this paper examines the extent to which differences in workers rates of time preferences can explain pension coverage outcomes we argue that workers with a high rate of time preference will avoid jobs with pensions because pension saving cannot be costlessly borrowed against and they will be more reluctant to join a defined benefit than a defined contribution plan because defined benefit plans offer less flexibility in choosing a pension saving rate the existing empirical literature on pension coverage emphasizes the role of taxes incentives administrative costs and employee perceptions of default and nonportability risks 1 this study concentrates on how the ability to borrow against pension contributions affects worker pension demand

econometric modeling of regional electricity spot prices in the australian market abstract wholesale electricity markets are increasingly integrated via high voltage interconnectors and inter regional trade in electricity is growing to model this we consider a spatial equilibrium model of price formation where constraints on inter regional flows result in three distinct equilibria in prices we use this to motivate an econometric model for the distribution of observed electricity spot prices that captures many of their unique empirical characteristics the econometric model features supply and inter regional trade cost functions which are estimated using bayesian monotonic regression smoothing methodology a copula multivariate time series model is employed to capture additional dependence both cross sectional and serial in regional prices the marginal distributions are nonparametric with means given by the regression means the model has the advantage of preserving the heavy right hand tail in the predictive densities of price we fit the model to half hourly spot price data in the five interconnected regions of the australian national electricity market the fitted model is then used to measure how both supply and price shocks in one region are transmitted to the distribution of prices in all regions in subsequent periods finally to validate our econometric model we show that prices forecast using the proposed model compares favorably with those from some benchmark alternatives

flexible inflation targeting and financial stability is it enough to stabilize inflation and output abstract we investigate empirically whether a central bank can promote financial stability by stabilizing inflation and output and whether additional stabilization of asset prices and credit growth would enhance financial stability in particular we employ an econometric model of the norwegian economy to investigate the performance of simple interest rate rules that allow a response to asset prices and credit growth in addition to inflation and output we find that output stabilization tends to improve financial stability additional stabilization of house prices equity prices and or credit growth enhances stability in both inflation and output but has mixed effects on financial stability in general financial stability as measured by e g asset price volatility improves while financial stability measured by indicators that depend directly on interest rates deteriorates mainly because of higher interest rate volatility owing to a more active monetary policy

basic interest rate bank competition and bank spread in personal credit operations in brazil a theoretical and empirical analysis abstract the debate on the strategy of banking spread reduction in brazil has been extended for a long time and was fundamentally concentrated in macroeconomics aspects this paper has the goal of evaluate the new policy of banking spread reduction implemented by the federal government which has added microeconomic aspects to this tendency in order to do so a mathematical model was presented that combines microeconomics aspects such as was developed by nakane 2001 with macroeconomics aspects originally presented by ho and saunders 1981 this model was tested for the 25 largest banks in the period of march 2009 to march 2013 using the panel data methodology the gmm system model was the one that best fitted the data gathered and the results showed that both aspects are relevant in explaining the banking spread in brazil and should not be analyzed separately as is frequently made in the literature considering the econometric problems related to the omission bias of relevant variables

model averaging in economics an overview standard practice in empirical research is based on two steps first researchers select a model from the space of all possible models second they proceed as if the selected model had generated the data therefore uncertainty in the model selection step is typically ignored alternatively model averaging accounts for this model uncertainty in this paper i review the literature on model averaging with special emphasis on its applications to economics finally as an empirical illustration i consider model averaging to examine the deterrent effect of capital punishment across states in the usa

consequences of seniority wages on the employment structure the author examines seniority wage profiles in german establishments to discern hiring patterns with respect to age and sex using the country s linked employer employee dataset liab over the per

delayed payment contracts and a firm s propensity to hire older workers there are jobs for which firms employ older workers but tend not to hire new older workers this may be attributable in part to implicit contracts that discourage worker shirking and malfeasance by shifting compensation to the end of the contract such delayed payment contracts can introduce a form of fixed costs into the employment relationship much as with hiring and training costs these fixed costs lead firms to hire primarily young long term workers while firms employ older workers workers who are serving out the last years of their contract they tend not to hire them this paper presents empirical evidence that is consistent with this argument

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

forecasting the distribution of economic variables in a data rich environment this article investigates the relevance of considering a large number of macroeconomic indicators to forecast the complete distribution of a variable the baseline time series model is a semiparametric specification based on the quantile autoregressive qar model that assumes that the quantiles depend on the lagged values of the variable we then augment the time series model with macroeconomic information from a large dataset by including principal components or a subset of variables selected by lasso we forecast the distribution of the h month growth rate for four economic variables from 1975 to 2011 and evaluate the forecast accuracy relative to a stochastic volatility model using the quantile score the results for the output and employment measures indicate that the multivariate models outperform the time series forecasts in particular at long horizons and in tails of the distribution while for the inflation variables the improved performance occurs mostly at the 6 month horizon we also illustra

constructing optimal density forecasts from point forecast combinations summary decision makers often observe point forecasts of the same variable computed for instance by commercial banks imf and the world bank but the econometric models used by such institutions are frequently unknown this paper shows how to use the information available on point forecasts to compute optimal density forecasts our idea builds upon the combination of point forecasts under general loss functions and unknown forecast error distributions we use real time data to forecast the density of us inflation the results indicate that the proposed method materially improves the real time accuracy of density forecasts vis a vis those from the unknown individual econometric models copyright 2013 john wiley sons ltd

seniority sectoral decline and employee retention an analysis of layoff unemployment spells we investigate the effect of tenure on employee retention under varying labor market conditions using a competing risks analysis of recall and new job acceptance applied to layoff unemployment spell data from waves 15 and 16 1982 83 of the panel study of income dynamics we find that adverse conditions sectoral employment decline significantly reduce the positive tenure effect on recall probabilities this result is consistent with firm default on delayed payment contracts and does not appear to reflect the effect of technological change on the value of firm specific investments

the effect of mandatory retirement on earnings profiles in japan using data from the japanese basic survey on wage structure for 1981 and 1986 the authors estimate the effect of the age of mandatory retirement on the rate of growth of earnings with job tenure i

combining var and dsge forecast densities a popular macroeconomic forecasting strategy utilizes many models to hedge against instabilities of unknown timing see among others stock and watson 2004 clark and mccracken 2010 and jore et al 2010 existing studies of this forecasting strategy exclude dynamic stochastic general equilibrium dsge models despite the widespread use of these models by monetary policymakers in this paper we use the linear opinion pool to combine inflation forecast densities from many vector autoregressions vars and a policymaking dsge model the dsge receives a substantial weight in the pool at short horizons provided the var components exclude structural breaks in this case the inflation forecast densities exhibit calibration failure allowing for structural breaks in the vars reduces the weight on the dsge considerably but produces well calibrated forecast densities for inflation

credit incentives and reputation a hedonic analysis of contractual wage profiles a hedonic analysis of principal agent employment contracts is developed in which workers and employers exchange labor services and contractual payment patterns within this framework tests of alternative hypotheses are formulated and applied to contract data from a unique household level survey of economic activity in rural china in 1935 the results indicate that credit market constraints motivated workers and employers contract choices that shirking by workers rather than by employers was the dominant incentive issue that reputational concerns rather than threats of termination were the key worker disciplining device and finally that the contract s third party acted as an enforcement device rather than as a matchmaker subject to the availability of matched agent principal data this structural approach to modeling agency relationships can also be used in contemporary settings

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