profit maximising goes global the race to the bottom we explore four decades of cyclical and long run dynamics in income distribution and economic activity for a panel of 13 oecd countries as measured by the wage share and output gap when modeled as predator prey dynamics economic activity in oecd countries is weakly profit led convergence to a long run equilibrium is relatively slow delaying the profit squeeze stage for many years our race to the bottom model suggests that the oecd countries have been engaged in undercutting each other s real unit labour costs an extension of the model shows that the long run equilibrium has been shifting south west towards a lower wage share it may even be that this race has the undesirable consequence of decreasing economic activity

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

taming macroeconomic instability monetary and macro prudential policy interactions in an agent based model abstract we develop an agent based model to study the macroeconomic impact of alternative macro prudential regulations and their possible interactions with different monetary policy rules the aim is to shed light on the most appropriate policy mix to achieve the resilience of the banking sector and foster macroeconomic stability simulation results show that a triple mandate taylor rule focused on output gap inflation and credit growth and a basel iii prudential regulation is the best policy mix to improve the stability of the banking sector and smooth output fluctuations moreover we consider the different levers of basel iii and their combinations we find that minimum capital requirements and counter cyclical capital buffers allow to achieve results close to the basel iii first best with a much more simplified regulatory framework finally the components of basel iii are non additive the inclusion of an additional lever does not always improve the performance of the macro prudential regulation

the predictive content of the output gap for inflation resolving in sample and out of sample evidence this paper evaluates potential explanations for the sometimes poor forecasting performance of the phillips curve one explanation is that out of sample metrics are noisy or equivalently have relatively low power another potential explanation is instability in the coefficients of the model to assess these forces this paper compares sample forecasting results to results from bootstrap simulations of models that either assume stability or allow breaks in the coefficients of the model this analysis indicates that a significant portion of the weakness of the out of sample evidence is attributable to power limitations but instabilities in the coefficients on the output gap also play a role

debt deleveraging and the liquidity trap a fisher minsky koo approach in this paper we present a simple new keynesian style model of debt driven slumps that is situations in which an overhang of debt on the part of some agents who are forced into rapid deleveraging is depressing aggregate demand making some agents debt constrained is a surprisingly powerful assumption fisherian debt deflation the possibility of a liquidity trap the paradox of thrift a keynesiantype multiplier and a rationale for expansionary fiscal policy all emerge naturally from the model we argue that this approach sheds considerable light both on current economic difficulties and on historical episodes including japan s lost decade now in its 18th year and the great depression itself

stability of a uk money demand equation a bayesian approach to testing exogeneity the paper analyses an m3 demand for money equation for the united kingdom attention is paid to the policy change that occurred in 1971 with the introduction of the measure known as competition and credit control classical and bayesian single equation instrumental variables procedures are developed to investigate the exogeneity of the short term interest rate and the constancy of the parameters of the underlying relationships the parameters of the short term equation have changed as well as the exogeneity status of the interest rate variable but the parameters of the long term equation appear to be less affected by the policy change

a new index of financial conditions we use factor augmented vector autoregressive models with time varying coefficients and stochastic volatility to construct a financial conditions index that can accurately track expectations about growth in key us macroeconomic variables time variation in the models parameters allows for the weights attached to each financial variable in the index to evolve over time furthermore we develop methods for dynamic model averaging or selection which allow the financial variables entering into the financial conditions index to change over time we discuss why such extensions of the existing literature are important and show them to be so in an empirical application involving a wide range of financial variables

the dynamic effects of money combining short run and long run identifying restrictions using bayesian techniques this paper proposes a bayesian approach to incorporating specification and identification uncertainty into a var analysis of the dynamic effects of money supply shocks on the macroeconomy the approach follows poirier 1991 in averaging over discrete model specifications in forming posterior densities of the dynamic responses to such shocks two distinct means of identifying money supply shocks are considered here one that imposes contemporaneous restrictions and one that imposes long run monetary neutrality i estimate bounds on dynamic responses that account for specification and parameter uncertainty and find strong evidence of short run real effects of money on the economy including a liquidity effect for both long term and short term interest rates furthermore some results differ substantially across identifying restrictions if model uncertainty is ignored

money income prices and interest rates including data from the 1980s sharply weakens the postwar time series evidence indicating significant relationships between money however defined and nominal income or between money and either real income or prices separately focusing on data from 1970 onward destroys this evidence altogether evidence indicating cointegration of real income and real money balances with due allowance for the effect of interest rates also deteriorates when the sample extends through the 1980s a positive finding is that the spread between the commercial paper rate and the treasury bill rate consistently contains highly significant information about future movements in real income copyright 1992 by american economic association

progressive supply side economics an explanation and update of the rehn meidner model the swedish rehn meidner model is a unique economic and wage policy program for the simultaneous achievement of full employment price stability growth and equality this article presents specif

interpreting euro area inflation at high and low frequencies abstract several authors have recently interpreted the european central bank s ecb s two pillar framework as separate approaches to forecast and analyse inflation at different time horizons or frequency bands the ecb has publicly supported this understanding of the framework this paper presents further evidence on the behaviour of euro area inflation using band spectrum regressions which allow for a natural definition of the short and long run in terms of specific frequency bands and causality tests in the frequency domain the main finding is that variations in inflation are well explained by low frequency movements of money and real output growth and high frequency fluctuations of the output gap

fiscal and monetary policies in complex evolving economies what is the most appropriate combination of fiscal and monetary policies in economies subject to banking crises and deep recessions we study this issue using an agent based model that is able to reproduce a wide array of macro and micro empirical regularities simulation results suggest that policy mixes associating unconstrained counter cyclical fiscal policy and monetary policy targeting employment is required to stabilise the economy we also show that discipline guided fiscal rules can be self defeating as they depress the economy without improving public finances finally we find that the effects of monetary and fiscal policies become sharper as the level of income inequality increases

the financial instability hypothesis a stochastic microfoundation framework this paper examines the dynamics of financial distress and in particular the mechanism of transmission of shocks from the financial sector to the real economy the analysis is performed by representing the linkages between microeconomic financial variables and the aggregate performance of the economy by means of a microfounded model with firms that have heterogeneous capital structures the model is solved both numerically and analytically by means of a stochastic approximation that is able to replicate quite well the numerical solution these methodologies by overcoming the restrictions imposed by the traditional microfounded approach enable us to provide some insights into the stabilization policies which may be effective in a financially fragile system

post keynesian stock flow consistent modelling a survey the aim of the paper is to provide an overview of the current stock ow consistent sfc literature indeed we feel the sfc approach has recently led to a blossoming literature requiring a new summary after the work of dos santos and above all after the publication of the main reference work on the methodology godley and lavoie s monetary economics an integrated approach to credit money income production and wealth the paper is developed along the following lines first a brief historical analysis investigates the roots of this class of models that can be traced as far back as 1949 and the work of copeland second the competing points of view regarding some of its main controversial aspects are underlined and used to classify the different methodological approaches followed in using these models namely we discuss i how the models are solved ii the treatment of time and its implication and ii the need or not for microfoundations these results are then used in the third section of the paper to develop a bifocal perspective which allows us to divide the literature reviewed according to both its subject and the methodology we explore various topics such as financialisation exchange rate modelling policy implication the need for a common framework within the post keynesian literature and the empirical use of sfc models finally the conclusions present some hypotheses and wishes for the possible lines of development of sfc models

oil prices and global factor macroeconomic variables abstract this paper investigates the relationship between oil prices global industrial production prices central bank policy interest rate and monetary aggregate with a global factor augmented error correction model we confirm the following stylized relationships i at global level money industrial production and prices are cointegrated ii positive innovation in global oil price is connected with global interest rate tightening iii positive innovation in global money price level and industrial production is connected with an increase in oil prices iv positive innovations in global interest rate are associated with a decline in oil prices and v the u s euro area and china are the main drivers of global macroeconomic factors

expectation formation mechanisms profitability of foreign exchange trading and exchange rate volatility an attempt is made to identify the expectation formation mechanism dominating the foreign exchange market and to demonstrate that exchange rate volatility can be attributed to the heterogeneity of traders with respect to expectation formation the criterion used to identify the dominance of a particular mechanism is the profitability of trading based on that mechanism it is concluded that mixed and extrapolative expectations are the dominant mechanisms that market participants follow some sort of a herd behaviour and that they pay attention to the expectations of other participants it is also found that the heterogeneity of market participants with respect to expectation formation goes a long way towards explaining volatility

cost benefit analysis of leaning against the wind abstract an obvious cost of leaning against the wind is a weaker economy if no financial crisis occurs possible benefits are lower probabilities and smaller magnitudes of crises a second cost less obvious previously overlooked but higher is a weaker economy if a crisis occurs for representative estimates costs exceed benefits by substantial margins overturning the result requires policy rate effects on the probability and magnitude of crises more than 5 40 standard errors larger than representative estimates higher probabilities larger magnitudes or longer durations of crises typical consequences of ineffective macroprudential policy increase the margin of costs over benefits

using survey data to test standard propositions regarding exchange rate expectations survey data provide a measure of exchange rate expectations superior to the forward rate in that no risk premium interferes we estimate extrapolative adaptive and regressive models of expectations static or random walk expectations and bandwagon expectations are rejected current appreciation generates the expectation of future depreciation because variables other than the contemporaneous spot rate receive weight in comparing expectations to the process governing the spot rate we find statistically significant bias no variable is as ubiquitous in international financial theory and yet as elusive empirically as investors expectations regarding exchange rates in the past expectations have been modeled in an ad hoc way often by using the forward exchange rate there is however a serious problem with using the forward discount as the measure of the expected change in the exchange rate in that the two may not be equal the gap that may separate the forward discount and expected depreciation is generally interpreted as a risk premium most of the large empirical literature testing the unbiasedness of the forward exchange rate for example has found it necessary either arbitrarily to assume away the existence of the risk premium if the aim

are survey forecasts trusted american trade account deficit and yen dollar rate abstract heterogenous expectations are considered to be reflected by strategic intention or wishful thinking and or by private information using survey data of the tokyo foreign exchange market tests are performed to determine whether heterogenous expectations contain private information

quantifying the concerns of dimon and buffett with data and computation abstract despite considerable efforts the determinants of firm growth and financial market volatility have not been definitively identified yet sets of stylized facts most notably power law distributions relating to firm size and market returns suggest both evolve as part of a complex system this scenario implies that a positive feedback loop between firms and investors exists and may be responsible for prejudicing the way management allocates their resources with firm and economic growth adversely affected further there are growing real world concerns that the management of publicly listed firms is becoming too concerned with the movement of their firm s share price which is adversely influencing resource allocation decisions a related concern is that agents in general within financial markets are placing a disproportionate focus on short term factors to investigate the ramifications of the proposed feedback loop on firm growth and market volatility this paper implements a novel agent based artificial stock market where management can consider the movements of their firm s endogenously determined share price when allocating resources between sales and margin growth the results highlight an inferior outcome regarding firm growth and various other financial metrics if management is overly concerned with share price movements the growth of the firms and market is also affected by the mixture of the investor classes initiated due to the divergent levels of volatility they create additionally the model presents insights into how and why the extent to which agents consider past outcomes in their decision making process becomes influential notably the model s results emulate an extensive set of global micro level firm data by providing significant insights on the effects of the stock market on management decision making and its ramifications for firm growth this paper provides crucial insights into the mechanisms responsible for inefficient behavior by market participants

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

inference in cointegrating models uk m1 revisited the paper addresses the practical determination of cointegration rank this is difficult for many reasons deterministic terms play a crucial role in limiting distributions and systems may not be formulated to ensure similarity to nuisance parameters finite sample critical values may differ from asymptotic equivalents dummy variables alter critical values often greatly multiple cointegration vectors must be identified to allow inference the data may be 1 2 rather than 1 1 altering distributions and conditioning must be done with care these issues are illustrated by an empirical application of multivariate cointegration analysis to a small model of narrow money prices output and interest rates in the uk copyright 1998 by blackwell publishers ltd

rethinking macroeconomics what failed and how to repair it the standard macroeconomic models have failed by all the most important tests of scientific theory they did not predict that the financial crisis would happen and when it did they understated its effects monetary authorities allowed bubbles to grow and focused on keeping inflation low partly because the standard models suggested that low inflation was necessary and almost sufficient for efficiency and growth after the crisis broke policymakers relying on the models floundered notwithstanding the diversity of macroeconomics the sum of these failures points to the need for a fundamental re examination of the models and a reassertion of the lessons of modern general equilibrium theory that were seemingly forgotten in the years leading up to the crisis this paper first describes the failures of the standard models in broad terms and then develops the economics of deep downturns and shows that such downturns are endogenous further the paper argues that there have been systemic changes to the structure of the economy that made the economy more vulnerable to crisis contrary to what the standard models argued finally the paper contrasts the policy implications of our framework with those of the standard models

international evidence on the efficacy of new keynesian models of inflation persistence in this paper we take an agnostic view of the phillips curve debate and carry out an empirical investigation of the relative and absolute efficacy of calvo sticky price sp sticky information si and sticky price with indexation models spi with emphasis on their ability to mimic inflationary dynamics in particular we look at evidence for a group of 13 oecd countries and we consider three alternative measures of inflationary pressure including the output gap labor share and unemployment we find that the calvo sp and the si models essentially perform no better than a strawman constant inflation model when used to explain inflation persistence indeed virtually all inflationary dynamics end up being captured by the residuals of the estimated versions of these models we find that spi model is preferable because it captures the type of strong inflationary persistence that has in the past characterized the economies of the countries in our sample however two caveats to this conclusion are that improvement in performance is driven mostly by the time series part of the model i e lagged inflation and that the spi model overemphasizes inflationary persistence thus there appears to be room for improvement via either modified versions of the above models or via development of new models that better track inflation persistence

semi autonomous household expenditures as the causa causans of postwar us business cycles the stability and instability of luxemburg type external markets similar patterns can be observed in post wwii us business cycles the initial upswings tend to be led by household investment and debt financed personal consumption expenditures which then wane in relative importance and lead downswings as those expenditures are financed in significant part by money creation they function as an external market driving accumulation by enabling monetary profit realisation in a way analogous to rosa luxemburg s treatment of the public and foreign sectors empirical studies on wage led profit led demand regimes typically exclude household investment or include it in with business investment this paper argues that it is vital to distinguish an independent role for semi autonomous household expenditures as a driver of effective demand and cyclical dynamics the failure to do so in empirical studies sustains misleading conclusions such as the perceived relevance of goodwin type profit squeeze cycles

cash flow investment and keynes minsky cycles this paper analyzes a dynamic model with 1 an investment function that emphasizes cash flow 2 a keynesian macroeconomic framework that determines cash flow endogenously 3 a dynamic labor market model that drives wage and price adjustments and 4 boundedly rational expectations simulations from the calibrated model generate endogenous cycles with characteristics described in hyman minsky s research the cycle arises from the link between investment interest rates debt service and cash flow the amplitude and frequency of the cycle are related to the importance of cash flow for investment the dynamics of inflation and the distribution of income

a clarification of the goodwin model of the growth cycle abstract we show that there is a difficulty in the original goodwin model which is also found in some more recent applications in it both the labour share and the proportion employed can exceed unity properties which are untenable however we show that the underlying dynamic structure of the model can be reformulated to ensure that these variables cannot exceed unity an illustrative example extends the original model and we argue it is both plausible and satisfies the necessary unit box restrictions

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

debt cycles instability and fiscal rules a godley minsky synthesis wynne godley and hyman minsky were two macroeconomists who saw the crisis coming this paper develops a simple macrodynamic model that synthesises some key perspectives of their analytical frameworks the model incorporates godley s financial balances approach and postulates that private sector s propensity to spend is driven by a stock flow norm the target net private debt to income ratio that changes endogenously via a minsky mechanism it also includes two fiscal rules a maastricht type fiscal rule according to which the fiscal authorities adjust the government expenditures based on a target net government debt ratio and a godley minsky fiscal rule which links government expenditures with private indebtedness following a counter cyclical logic the analysis shows that i the interaction between the propensity to spend and net private indebtedness can generate cycles and instability ii instability is more likely when the propensity to spend responds strongly to deviations from the stock flow norm and when the expectations that determine the stock flow norm are highly sensitive to the economic cycle iii the maastricht type fiscal rule is destabilising while the godley minsky fiscal rule is stabilising iv the paradox of debt can apply both to the private sector and the government sector

learning about monetary policy rules abstract we study macroeconomic systems with forward looking private sector agents and a monetary authority that is trying to control the economy through the use of a linear policy feedback rule we use stability under recursive learning a la evans and honkapohja learning and expectations in macroeconomics princeton university press princeton new jersey 2001 as a criterion for evaluating monetary policy rules in this context we find that considering learning can alter the evaluation of alternative policy rules

on stock market illiquidity and real time gdp growth this study examines whether stock market illiquidity forecasts real uk gdp growth using data over the period 1989q1 2012q2 apart from standard linear model specifications we also utilize non linear models which allow for regime switching behavior in terms of a liquid versus an illiquid market regime and over the phases of the business cycle our findings support a statistically significant negative relationship between stock market illiquidity and future uk gdp growth over and above the usual control variables this relationship is found to be stronger during periods of highly illiquid market conditions and weak economic growth our out of sample forecasting analysis indicates that a regime switching model of illiquid versus liquid market conditions predicts uk growth better than any other model actually this model is the only one to significantly outperform the gdp growth forecasts published in the bank of england s inflation report

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

data revisions and the expenditure components of gdp the constant price components of the expenditure estimate of gdp for the united kingdom undergo an extensive process of revision as new information comes to light this study is concerned with three central themes the authors assess whether the preliminary vintages efficiently incorporate information available at the time of their compilation whether there is any evidence for the nonstationarity of data revisions and how to construct constant price time series when there are several changes of base copyright 1991 by royal economic society

pseudo goodwin cycles in a minsky model goodwin cycles result from the dynamic interaction between a profit led demand regime and a reserve army effect in income distribution the paper proposes the concept of a pseudo goodwin cycle we define this as a counter clockwise movement in output and wage share space which is not generated by the usual goodwin mechanism in particular it does not depend on a profit led demand regime to illustrate this a simple minsky type model is extended by a reserve army distribution adjustment in this model the cycle is generated by the interaction of financial fragility and demand the wage share rises at higher levels of output but this generates no feedback so that by design demand does not react to changes in income distribution but the model does exhibit a pseudo goodwin cycle in the output wage share space this holds true even if we introduce a wage led demand regime this demonstrates that the existence of a counter clockwise movement of output and the wage share cannot be regarded as proof of the existence of a goodwin cycle and a profit led demand regime

testing goodwin growth cycles in ten oecd countries following desai 1984 goodwin s simple predator prey growth cycle model of the economy 1967 is tested using post war data for ten oecd countries australia canada finland france germany greece italy norway the uk and the us at a quantitative level goodwin s model is found not to be adequate i estimated parameter values poorly predict the cycles centres and ii goodwin s restrictive assumptions are not justified however at a qualitative level the evidence presented here for the existence of goodwin type cycles is extremely encouraging justifying both existing theoretical extensions of goodwin s model and further empirical work in this area copyright 2000 by oxford university press

income distribution credit and fiscal policies in an agent based keynesian model this work studies the interactions between income distribution and monetary and fiscal policies in terms of ensuing dynamics of macro variables gdp growth unemployment etc on the grounds of an agent based keynesian model the direct ancestor of this work is the keynes meeting schumpeter formalism presented in dosi et al 2010 to that model we add a banking sector and a monetary authority setting interest rates and credit lending conditions the model combines keynesian mechanisms of demand generation a schumpeterian innovation fueled process of growth and minskian credit dynamics the robustness of the model is checked against its capability to jointly account for a large set of empirical regularities both at the micro level and at the macro one the model is able to catch salient features underlying the current as well as previous recessions the impact of financial factors and the role in them of income distribution we find that different income distribution regimes heavily affect macroeconomic performance more unequal economies are exposed to more severe business cycles fluctuations higher unemployment rates and higher probability of crises on the policy side fiscal policies do not only dampen business cycles reduce unemployment and the likelihood of experiencing a huge crisis in some circumstances they also affect positively long term growth further the more income distribution is skewed toward profits the greater the effects of fiscal policies about monetary policy we find a strong non linearity in the way interest rates affect macroeconomic dynamics in one regime with low rates changes in interest rates are ineffective up to a threshold beyond which increasing the interest rate implies smaller output growth rates and larger output volatility unemployment and likelihood of crises

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

leaning against boom bust cycles in credit and housing prices this paper studies the potential gains of monetary and macro prudential policies that lean against house price and credit cycles we rely on a model that features borrowers and savers and allows for over borrowing induced by news shock driven cycles we find that policy that responds to changes in financial variables is socially optimal considering the use of a single policy instrument both types of agents are better off when the interest rate optimally responds to credit growth when we allow for the implementation of both interest rate and ltv policies heterogeneity in the welfare implications is key in determining the optimal use of policy instruments the optimal policy for the borrowers is characterized by a ltv ratio that responds countercyclically to credit growth which most effectively stabilizes credit relative to gdp in contrast the optimal policy for the savers features a constant ltv ratio coupled with an interest rate response to credit growth news shock driven cycles account for most of the gains from a policy response to changes in financial variables

monetary aggregates as monetary targets a statistical investigation in this paper the authors analyze statistical properties of the monetary base m1 and m2 for the postwar u s data record the authors are specifically interested in answering three policy related questions first to what extent do these monetary aggregates contain information useful for predicting movements in prices and real output second how do the aggregates rank as to their predictive usefulness third how do these aggregates rank as to the stability of their relationship to the macroeconomy copyright 1992 by ohio state university press

functional income distribution and aggregate demand in the euro area an increase in the wage share has contradictory effects on the subaggregates of aggregate demand private consumption expenditures ought to increase because wage incomes typically are associated with higher consumption propensities than capital incomes investment expenditures ought to be negatively affected because investment will positively depend on profits net exports will be negatively affected because an increase in the wage share corresponds to an increase in unit labour costs and thus a loss in competitiveness therefore theoretically aggregate demand can be either wage led or profit led depending on how these effects add up the results will crucially depend on how open the economy is internationally the paper estimates a post kaleckian macro model incorporating these effects for the euro area and finds that the euro area is presently in a wage led demand regime implications for wage policies are discussed

exchange rate models and exchange rate expectations an empirical investigation a non parametrictest of popular modern exchange rate models under alternative expectation specifications is presented it is found that there is little difference in the predictive success of the alternative exchange rate models however there are significant differences in the performance of a model depending upon the expectations mechanism specified our most important finding is that the flexible price monetary model the portfolio balance model and a hybrid model under extrapolative and adaptive expectations mechanisms provide statistically significant information about the direction of exchange rate movements by contrast the same models when employing static regressive and rational expectation mechanisms do not provideany satistically significant information

expectation formation in the foreign exchange market a time varying heterogeneity approach using survey data using consensus economics survey data on jpy usd and gbp usd exchange rate expectations for the 3 and 12 month horizons over the period november 1989 december 2012 we first show that expectations fail the conventional tests of unbiasedness and do not exhibit a learning process towards rationality our approach is consistent with the economically rational expectations theory feige and pearce 1976 which states that information costs and agents aversion to misestimating future exchange rates determine the optimal amounts of information on which they base their expectations the time variability of the cost aversion ratios justifies at the aggregate level a representation of expectations as a linear combination of the traditional extrapolative adaptive and regressive processes augmented by a forward market component whose parameters are allowed to change over time this mixed expectation model with unstable heterogeneity is validated by our kalman filter estimation results for the two currencies and

effective demand class struggle and cyclical growth the paper presents an analytical model of endogenous cyclical growth in a pure capitalist economy the model integrates keynesian ideas on effective demand with a marxian emphasis on class struggle and the reserve army of labor for reasonable parameter values the model has a unique nontrivial balanced growth equilibrium the equilibrium is unstable and using the poincare bendixson theorem it is shown that the economy will exhibit perpetual fluctuations around the balanced growth path copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

efficiency and formation of expectations evidence from the european investment survey the european commission conducts an annual survey regarding planned and realized business fixed investment across various manufacturing sectors in euroland in this study we investigate the predictive content of survey based expectations on investment in addition we empirically test the rationality of respondents both in a time series as well as in a panel context according to our results based on pooling the data efficiency is rejected since expectations are biased predictors of actual outcomes furthermore expectations revisions are found to be correlated with components of the information set known at the time of decision making finally our results qualify regressive expectations as the mechanism that more adequately describes the formation of expectations

aggregate infrastructure capital stock and long run growth evidence from finnish data abstract in this paper bayesian methods and the finnish aggregate infrastructure capital series from 1860 to 2003 are used to explore how government infrastructure policy affects long run output growth we use finnish data since to the best of our knowledge the finnish land and water construction investments series is the best available sufficiently long time series on aggregate infrastructure investments the finnish data provide strong and robust evidence indicating that permanent changes in government infrastructure policy have permanent effects on the growth rate of output

winter is possibly not coming mitigating financial instability in an agent based model with interbank market abstract we develop a macroeconomic agent based model to study how financial instability can emerge from the co evolution of interbank and credit markets and the policy responses to mitigate its impact on the real economy the model is populated by heterogenous firms consumers and banks that locally interact in different markets in particular banks provide credit to firms according to a basel ii or iii macro prudential frameworks and manage their liquidity in the interbank market the central bank performs monetary policy according to different types of taylor rules we find that the model endogenously generates market freezes in the interbank market which interact with the financial accelerator possibly leading to firm bankruptcies banking crises and the emergence of deep downturns this requires the timely intervention of the central bank as a liquidity lender of last resort moreover we find that the joint adoption of a three mandate taylor rule tackling credit growth and the basel iii macro prudential framework is the best policy mix to stabilize financial and real economic dynamics however as the liquidity coverage ratio spurs financial instability by increasing the pro cyclicality of banks liquid reserves a new counter cyclical liquidity buffer should be added to basel iii to improve its performance further finally we find that the central bank can also dampen financial instability by employing a new unconventional monetary policy tool involving active management of the interest rate corridor in the interbank market

testing the rationality of exchange rate and interest rate expectations an empirical study of australian survey based expectations this paper examines the rationality of the australian survey based expectations 1 and 4 week ahead us a exchange rate and 2 and 4 week ahead australian 90 day bank bill and 10 year bond rates the actual and expected variables are found to be cointegrated indicating that the expected future values and the future realizations of the exchange rate and interest rates have long run equilibrium relationships ols estimations with the newey west corrections are employed for testing the unbiased expectations hypothesis ueh where the frequency of the expectations data is finer than the forecast horizons and the exponential garch models that take into account the time varying nature of the forecasterror variance are employed for testing the weak rational expectations hypothesis wreh the evidence shows that the wreh could not be rejected in any case except for the two week ahead forecast of the 90 day interest rate which indicates that all available information is used at the time of forming relevant

growth cycles with induced technical change this paper concerns itself with two related topics the relative shares of workers and capitalists in the national income and the labour augmenting bias of technical change both have been dealt with in contrasting fashion in two seminal papers on distribution theory kennedy i964 attempts to explain the then observed constancy of relative shares with the help of the now famous invention possibility frontier however the wage and profit rates are exogeneous to his model goodwin i967 on the other hand presents a model of cycles in growth rates in which the share of labour the wage rate and the profit rate are endogenously determined however unlike the kennedy analysis technical change is assumed to be constant and exogeneously given given that these pioneering works have addressed themselves to important questions it seems a worthwhile task to build a model in which the shares of labour and capital the wage rate the profit rate and technical change are all endogenously determined the perspective we have chosen here introduces the key element of kennedy s perception induced technical change into the goodwin scheme and the consequences of so doing are traced out in the following terse account there are two classes in the economy workers and capitalists only one good q t is produced and it can be either consumed or invested capital stock k t is homogeneous and for simplicity also assumed to be non depreciating the capital output ratio at time t is denoted by o t labour i t is also homogeneous and its productivity at time t a t q t l t improves at the rate ac t labour s share in the national income denoted by u t is

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

do dollar forecasters believe too much in ppp this article extends earlier studies on exchange rate expectations formation by using new data and adding information about forecasters reliance on fundamental analysis for the first time we replicate the conventional result of nonrational expectations moreover biases in expectations are identified as professionals significantly believe too much in mean reversion mean being represented by purchasing power parity ppp when respondents are grouped on their reliance to fundamental analysis fundamentalists reveal an even stronger bias those who rely the least on fundamentals preferring technical analysis instead show a significantly smaller bias towards ppp in lieu of expecting too much trend extrapolation biased beliefs will grow stronger when the us dollar is further away from ppp finally the accuracy of the expectations is poor for both groups however we find directional forecasting ability

distribution and growth reconsidered empirical results for six oecd countries we analyse the relationship between functional income distribution and economic growth in austria france germany the netherlands the uk and the usa from 1960 until 2005 the analysis is based on a demand driven distribution and growth model for an open economy inspired by bhaduri and marglin which allows for either profit or wage led growth we find that growth in france germany the uk and the usa has been wage led whereas austria and the netherlands have been profit led in the case of austria a domestically wage led economy changes to profit led when including the effect of distribution on external trade the netherlands however are already profit led without external trade our results so far only partially confirm bhaduri and marglin s theoretical conclusion that wage led growth becomes less feasible when the effects of distribution on foreign trade are taken into account

are foreign exchange forecasts rational new evidence from survey data abstract tests of rationality in foreign exchange markets have been inconclusive because of disagreement over the relevant asset pricing model this paper uses a newly available set of data on foreign exchange expectations to directly test the rationality of four foreign currency markets overall the results reject the rational expectations hypothesis

money and output viewed through a rolling window abstract we examine the extent to which fluctuations in the money stock anticipate or granger cause fluctuations in real output using a variety of rolling window and increasing window estimation techniques various models are considered using simple sum as well as divisia measures of m 1 and m 2 income prices and both the t bill rate and the commercial paper rate findings indicate that the relation between income money prices and interest rates is stable as long as sufficient data are used and that there is cointegration among the variables considered although cointegration spaces become very difficult to estimate precisely when smaller windows of data are used further both m 1 and m 2 are shown to be important predictors of income for the entire period from 1960 2 1996 3 based on modified versions of what we term the most damaging specifications from friedman and kuttner 1993 and thoma 1994 our new evidence is based in part on a rather novel model selection approach to examining the relationship between money and income 1998 elsevier science b v all rights reserved

minsky models a structured survey minsky s ideas have recently gained prominence in the mainstream as well as in the heterodox literature however there exists no agreement upon the formal presentation of minsky s insights the aim of this paper is to survey the literature and identify differences and similarities in the ways through which minskyan ideas have been formalised we distinguish between the models that focus on the dynamics of debt or interest with no or a secondary role for asset prices and the models in which asset prices play a key role in the dynamic behaviour of the economy within the first category of models we make a classification between i the kalecki minsky models ii the kaldor minsky models iii the goodwin minsky models iv the credit rationing minsky models v the endogenous target debt ratio models and vi the minsky veblen models within the second category of models we distinguish between i the equity price minsky models and ii the real estate price minsky models key limitations of the models and directions for future research are outlined

emergent dynamics of a macroeconomic agent based model with capital and credit in this paper we present and discuss a macroeconomic agent based model with capital and credit cc mabm which builds upon the framework put forward by delli gatti et al 2011 the novelty of this model with respect to the previous framework consists in the introduction of a stylized supply chain where upstream firms i e producers of capital goods k firms supply a durable and sticky input capital to the downstream firms who produce consumption goods c firms to be sold to households both c firms and k firms resort to bank loans to satisfy their financing needs there are two way feedbacks between firms and markets which yield interesting emerging properties at the macro level we show that the interaction of upstream and downstream firms and the evolution of their financial conditions in a nutshell capital and credit are essential ingredients of a crisis i e a sizable slump followed by a long recovery

foreign exchange rate expectations micro survey data this paper analyzes the panel data of biweekly surveys on the yen dollar exchange rate expectations of forty four institutions for two years and contains four major findings first market participants are heterogeneous that is significant individual effects exist in their expectation formation second the individual effects have a characteristic of wishful expectations exporters expect yen depreciation and importers expect yen appreciation relative to others third many violate the rational expectations hypothesis fourth forecasts with long horizons show less yen appreciation than those with short horizons cross equation constraints implied by the consistency of the forecast term structure are strongly rejected in the data copyright 1990 by american economic association

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

predicting inflation does the quantity theory help i introduction inflation forecasting has played a key role in recent u s monetary policy and this has led to a renewed search for variables that serve as good indicators of future inflation one frequently used indicator based on the phillips curve is the unemployment rate or a similar measure of the output gap as in gerlach and svensson 2003 clark and mccracken 2003 mankiw 2001 and gali and gertler 1999 the phillips curve is believed by many to be the preferred tool for forecasting inflation see e g mankiw 2001 stock and watson 1999a blinder 1997 though as argued by sargent 1999 its use in formulating monetary policy is not without controversy another approach based on the quantity theory of money uses monetary aggregates to predict inflation despite the strong theoretical motivation for this approach though there is little evidence that measures of the nominal money supply are useful for predicting inflation relative to a conventional unemployment rate phillips curve model see stock and watson 1999a for a detailed analysis of the forecast performance of popular inflation indicators stock and watson s results indicate that even simple univariate time series models generally forecast about as well as models that include measures of the money supply so that it is hard to make the case that nominal money supply data have any predictive content for inflation 1 this article evaluates inflation forecasts made by models that allow for prices money and output to be cointegrated and in the process reexamines the question of whether monetary aggregates have marginal predictive content for inflation our work is motivated in part by economic theory as the presence of a cointegrating relationship among the series we look at corresponds to an implicit assumption that prices the money supply and output hang together in the long run an implicit feature of most analyses based on the quantity theory from a statistical point of view a system with cointegrated regressors does not have a finite order vector autoregressive var representation so that a var in differences will be misspecified and may not forecast well regardless of the relevance of the included variables our analysis is therefore focused on the questions are there gains in terms of forecast accuracy from imposing the restriction that prices money and output are cointegrated does it matter whether cointegrating restrictions are imposed a priori based on economic theory or can they be estimated and do models imposing cointegration among prices money and output forecast inflation as well as the phillips curve and other alternative models the econometric framework that we employ is similar to that of stock and watson 1999a but differs from theirs in two ways first stock and watson 1999a consider one year horizon inflation forecasts whereas we consider forecast horizons of up to five years this is potentially important in our context as we include versions of the quantity theory of money in our analysis a theory that arguably may not yield substantive gains to forecasting in the short run additionally future inflation at many horizons is in general of interest to policy makers even if the weight attached to inflation at different horizons is a matter of individual preference so that long run predictions are only unuseful if and when they fail to have marginal predictive content for inflation 2 a second difference between our work and that of stock and watson 1999a is that some of our models differ from theirs including those that impose quantity theory based cointegrating restrictions for example in these types of models we 1 impose a cointegration restriction derived from the assumption of stationary velocity and 2 estimate cointegrating restrictions we also examine a fairly broad variety of linear models including simple autoregressive ar models in levels and differences conventional unemployment rate phillips curve models and var models in levels and differences with money prices and output

what drives markups evolutionary pricing in an agent based stock flow consistent macroeconomic model this paper studies coordination between firms in a multi sectoral macroeconomic model with endogenous business cycles firms are both in competition and interdependent and set their prices with a markup over unit costs markups are heterogeneous and evolve under market pressure we observe a systematic coordination within firms in each sector and between each sector the resulting pattern of relative prices are consistent with the labor theory of value those emerging features are robust to technology shocks

further evidence on exchange rate expectations abstract this paper considers a previously unexploited survey data set of exchange rate expectations which allows us to focus on differences between ems and dollar exchange rates we corroborate the earlier finding in the literature that exchange rate forecasts are not rational and that agents do not use all available information efficiently although extrapolative and adaptive expectations formation mechanisms describe non ems exchange rate expectations to a certain extent ems exchange rates forecasts seem to follow long run fundamentals more closely and would suggest that agents believe that ems exchange rate expectations undershoot their long run equilibrium values jel f31

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

patterns in exchange rate forecasts for twenty five currencies the properties of exchange rate forecasts are investigated with a data set encompassing a broad cross section of currencies over the entire sample expectations appear to be biased this result is robust to the possibility of random measurement error in the survey measures there appear to be statistically significant differences in the degree of bias in subgroupings of the data the bias is lower for the high inflation countries the bias is greater for the major currencies studied in earlier papers and the bias is also greater for the ems currencies copyright 1994 by ohio state university press

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

deleveraging crises and deep recessions a behavioural approach macroeconomic dynamics are characterized by alternating patterns of periods of relative stability and large swings standard micro founded macro economic models account for these patterns through exogenous and persistent shocks in this paper we develop a fully decentralized and micro founded macro economic agent based model augmented with an opinion model which produces endogenous waves of pessimism and optimism that feed back into firms leverage and households precautionary saving behaviour a major emergent property of our model is precisely the complex successions of stable and unstable macro economic regimes the model is further able to account for a wide spectrum of macro and micro empirical regularities within this framework we analyse a series of macro economic phenomena of key relevance in the current macro economic debate especially the occurrence of deleveraging crises and fisherian debt deflation recessions our analysis suggests that the relative dynamics of prices and wages and the resulting income distribution along a deflation ary path are critical determinants of the severity of the recession and the chances of recovery

eurosystem monetary targeting lessons from u s data abstract using a small empirical model of inflation output and money estimated on u s data we compare the relative performance of monetary targeting and inflation targeting the results show monetary targeting to be quite inefficient yielding both higher inflation and output variability this is true even with a nonstochastic money demand formulation our results are also robust to using a p model of inflation therefore in these popular frameworks there is no support for the prominent role given to money growth in the eurosystem s monetary policy strategy

is the fed too timid monetary policy in an uncertain world estimates of the taylor rule using historical data from the past decade or two suggest that monetary policy in the u s can be characterized as having reacted in a moderate fashion to output and in

the real time predictive content of money for output abstract data on monetary aggregates are subject to periodic redefinitions presumably in part to improve their link to measures of output money data are also revised on a regular basis taking these data imperfections into account we reassess the evidence on the marginal predictive content of m1 and m2 for real and nominal output in particular first by using the latest version of the data that is available and then using sequences of historical time series that would have been available to forecasters in real time we are able to provide a comprehensive assessment of whether money is useful for predicting output we conclude that the generally significant marginal predictive content of m1 or m2 for output that is found using a recently revised data set is not duplicated in a real time setting although m2 is shown to remain useful when 1 year ahead forecasts are constructed using fitted vector autoregressive models

agent based stock flow consistent macroeconomics towards a benchmark model abstract the paper moves from a discussion of the challenges posed by the crisis to standard macroeconomics and the solutions adopted within the dsge community although several recent improvements have enhanced the realism of standard models we argue that major drawbacks still undermine their reliability in particular dsge models still fail to recognize the complex adaptive nature of economic systems and the implications of money endogeneity the paper argues that a coherent and exhaustive representation of the inter linkages between the real and financial sides of the economy should be a pivotal feature of every macroeconomic model and proposes a macroeconomic framework based on the combination of the agent based and stock flow consistent approaches the papers aims at contributing to the nascent ab sfc literature under two fundamental respects first we develop a fully decentralized ab sfc model with several innovative features and we thoroughly validate it in order to check whether the model is a good candidate for policy analysis applications results suggest that the properties of the model match many empirical regularities ranking among the best performers in the related literature and that these properties are robust across different parameterizations second the paper has also a methodological purpose in that we try to provide a set or rules and tools to build calibrate validate and display ab sfc models

schumpeter meeting keynes a policy friendly model of endogenous growth and business cycles this paper studies an agent based model that bridges keynesian theories of demandgeneration and schumpeterian theories of technology fueled economic growth we employ the model to investigate the properties of macroeconomic dynamics and the impact of public polices on supply demand and the fundamentals of the economy we find profound complementarities between factors influencing aggregate demand and drivers of technological change that affect both short run fluctuations and longterm growth patterns from a normative point of view simulations show a corresponding complementarity between keynesian and schumpeterian policies in sustaining long run growth paths characterized by milder fluctuations and relatively lower unemployment levels the matching or mismatching between innovative exploration of new technologies and the conditions of demand generation appear to suggest the presence of two distinct regimes of growth or absence thereof characterized by different short run fluctuations and unemployment levels

data revisions and the identification of monetary policy shocks abstract monetary policy research using time series methods has been criticized for using more information than the federal reserve had available to quantify the role of this criticism we estimate vars with real time data while accounting for the latent nature of many economic variables such as output our estimated monetary policy shocks are closely correlated with typically estimated measures the impulse response functions are broadly similar across estimation methods our evidence suggests that the use of revised data in var analyses of monetary policy shocks may not be a serious limitation for recursively identified systems but presents more challenges for simultaneous systems

disequilibrium dynamics an empirical study despite the amount of attention devoted in economics to the study of equilibria the process by which an equilibrium can be attained is not well understood stephen smale 1977 called this the fundamental problem of economic theory this paper explores the microeconomics of the adjustment process by examining empirically the disequilibrium behavior of firms implications for the microeconomic foundations of macroeconomics are stressed the data from german industry describe the month by month price and output changes of individual firms as well as the firms own assessments of the levels of their inventories and unfilled orders because the data are qualitative use is made of the multivariate conditional logit model developed by marc nerlove and s james press 1973 1976 and extended by kawasaki and zimmermann section i discusses the underlying model of firm behavior and the significance of the inquiry for macroeconomics in section ii the econometric techniques are briefly described in section iii the empirical results are summarized and interpretations of the results are offered in section iv

stabilizing an unstable complex economy on the limitations of simple rules abstract this paper offers a systematic comparison of a wide range of leaning against the wind interest rate policy rules within a macroeconomic stock flow consistent agent based model the model generates endogenous booms and busts along credit cycles as feedback loops on aggregate demand affect the goods and the labor markets the real and the financial sides of the economy are closely interconnected the baseline scenario is able to qualitatively reproduce a wide range of stylized facts we show that a monetary policy rule that targets the movements in the net worth of firms significantly dampens the credit cycles and reduces the employment costs of financial crises because this indicator incorporates early signals of financial imbalances performances of this three mandate taylor rule are also more robust to the specific parameter values and regulatory framework than the standard dual mandate taylor rules nonetheless none of the policy rules under study completely eliminates the high employment costs of financial crises

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

the past present and future of central banking the financial crisis on the one hand and the recourse to unconventional monetary policy on the other have given a sharp jolt to perceptions of the role and status of central banks in this paper we start with a brief contrarian history of central banks since the second world war which presents the great moderation and the restricted focus on inflation targeting as a temporary aberration from the norm we then discuss how recent developments in fiscal and monetary policy have affected the role and status of central banks notably their relationships with governments before considering the environment central banks will face in the near and middle future and how they will have to change to address it copyright 2012 oxford university press

commodity prices and bric and g3 liquidity a sfavec approach this paper investigates the influence of liquidity in the major developed and major developing economies on commodity prices liquidity is taken to be m2 a novel finding is that unanticipated increases in the bric countries liquidity is associated with significant and persistent increases in commodity prices that are much larger than the effect of unanticipated increases in g3 liquidity and the difference increases over time over 1999 2012 bric liquidity is strongly linked with global energy prices and global real activity whereas g3 liquidity is not the impact of bric liquidity on mineral and metal prices is twice as large as that of g3 liquidity granger casualty goes from liquidity to commodity prices bric and g3 liquidity and commodity prices are cointegrated bric and g3 liquidity and global output and global prices are cointegrated we construct a structural factor augmented error correction sfavec model

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