Real-Time Prediction With U.K. Monetary Aggregates in the Presence of Model Uncertainty

Garratt, Anthony; Koop, Gary; Mise, Emi; Vahey, Shaun P.

doi:10.1198/jbes.2009.07208

Cited by 62 publications

(61 citation statements)

References 30 publications

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“…However, since these uniform priors are not necessarily non-informative, we control our results using approximate posterior model probabilities based on the Schwarz Bayesian Information Criterion (BIC); see Schwarz (1978) and Garratt et al (2007). Specifically,…”

Section: Econometric Approachmentioning

confidence: 99%

A naïve sticky information model of households’ inflation expectations

Lanne

Luoma²,

Luoto

2009

Journal of Economic Dynamics and Control

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This paper provides a simple epidemiology model where households, when forming their inflation expectations, rationally adopt the past release of inflation with certain probability rather than the forward-looking newspaper forecast as suggested in Carroll [2003, Macroeconomic Expectations of Households and Professional Forecasters, Quarterly Journal of Economics, 118, 269-298]. The posterior model probabilities based on the Michigan survey data strongly support the proposed model. We also extend the agentbased epidemiology model by deriving for it a simple adaptation, which is suitable for estimation. Our results show that this model is able to capture the heterogeneity in households' expectations very well.JEL Classification: C11, C53, C82, D84, E31.

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Section: Econometric Approachmentioning

confidence: 99%

A naïve sticky information model of households’ inflation expectations

Lanne

Luoma²,

Luoto

2009

Journal of Economic Dynamics and Control

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“…The number of lags in the regression models for output, money, prices, and interest rates is selected using the SIC. For related studies, see Amato and Swanson (2001) and Garratt, Koop, Mise, and Vahey (2009).…”

Section: Real-time Marginal Predictive Content Of Money For Outputmentioning

confidence: 99%

“…2 In order to illustrate the implementation of our experimental setup, we carry out an empirical analysis in which we examine the real-time predictive content of money for income, building on the work of Stock and Watson (1989), Amato and Swanson (2001), Garratt, Koop, Mise, and Vahey (2009), and others. While we find little marginal predictive content in money, we note that vector autoregressions with money do not perform significantly worse than autoregressions, when predicting output in the past 20 years.…”

Section: Introductionmentioning

confidence: 99%

Real-Time Datasets Really Do Make a Difference: Definitional Change, Data Release, and Forecasting

Martín

Swanson

2009

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In this paper, we empirically assess the extent to which early release inefficiency and definitional change affect prediction precision. In particular, we carry out a series of ex-ante prediction experiments in order to examine: the marginal predictive content of the revision process, the trade-offs associated with predicting different releases of a variable, the importance of particular forms of definitional change which we call "definitional breaks", and the rationality of early releases of economic variables. An important feature of our rationality tests is that they are based solely on the examination of ex-ante predictions, rather than being based on in-sample regression analysis, as are many tests in the extant literature. Our findings point to the importance of making real-time datasets available to forecasters, as the revision process has marginal predictive content, and because predictive accuracy increases when multiple releases of data are used when specifying and estimating prediction models. We also present new evidence that early releases of money are rational, whereas prices and output are irrational. Moreover, we find that regardless of which release of our price variable one specifies as the "target" variable to be predicted, using only "first release" data in model estimation and prediction construction yields mean square forecast error (MSFE) "best" predictions. On the other hand, models estimated and implemented using "latest available release" data are MSFE-best for predicting all releases of money. We argue that these contradictory finding are due to the relevance of definitional breaks in the data generating processes of the variables that we examine. In an empirical analysis, we examine the real-time predictive content of money for income, and we find that vector autoregressions with money do not perform significantly worse than autoregressions, when predicting output during the last 20 years. Terms of use: Documents in

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“…Swanson (1998), Bachmeier and Swanson (2005) and Garratt et al (2009) among the log of prices, money and output is preferred, allowing the short and long term properties of the data to be captured.…”

Section: Unit Root and Cointegrationmentioning

confidence: 99%

Not All International Monetary Shocks are Alike for the Japanese Economy

Ratti

Vespignani

2014

SSRN Journal

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It is found that over 1999:1-2012:12 China's monetary expansion influences Japan through the effect of China's growth on world commodity prices, increased demand for imports, and exchange rate policy. China's monetary expansion is associated with significant increases in Japan's industrial production, exports and inflation, and decreases in the trade-weighted yen. In contrast, U.S. monetary expansion results in contraction in Japan's industrial production, exports and trade balance (expenditure-switching). Monetary expansion in the Euro area does not significantly affect Japan. Structural vector error correction models are estimated. Results are robust to various contemporaneous restrictions for the effect of international monetary variables, the interaction of foreign and domestic variables and to factor augmented VAR to identify monetary shocks.

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Real-Time Prediction With U.K. Monetary Aggregates in the Presence of Model Uncertainty

Cited by 62 publications

References 30 publications

A naïve sticky information model of households’ inflation expectations

A naïve sticky information model of households’ inflation expectations

Real-Time Datasets Really Do Make a Difference: Definitional Change, Data Release, and Forecasting

Not All International Monetary Shocks are Alike for the Japanese Economy

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