Search Results
Working Paper
Real-time macroeconomic monitoring: real activity, inflation, and interactions
The authors sketch a framework for monitoring macroeconomic activity in real-time and push it in new directions. In particular, they focus not only on real activity, which has received most attention to date, but also on inflation and its interaction with real activity. As for the recent recession, the authors find that (1) it likely ended around July 2009; (2) its most extreme aspects concern a real activity decline that was unusually long but less unusually deep, and an inflation decline that was unusually deep but brief; and (3) its real activity and inflation interactions were strongly ...
Discussion Paper
Have postwar economic fluctuations been stabilized?
Previous investigations of whether the volatility of the U.S. economy diminished after World War II have been inconclusive because of questionable prewar macroeconomic aggregates. We examine, more broadly, the hypothesis of the stabilization of the postwar economy by focusing on the duration of business cycles, rather than their amplitude; in the process, we avoid the debate about the quality of prewar aggregates. Using distribution-free statistics, we find clear evidence of postwar duration stabilization in terms of a shift toward longer expansions and shorter contractions. Moreover, we find ...
Working Paper
Measuring financial asset return and volatility spillovers, with application to global equity markets
The authors provide a simple and intuitive measure of interdependence of asset returns and/or volatilities. In particular, they formulate and examine precise and separate measures of return spillovers and volatility spillovers. The authors framework facilitates study of both noncrisis and crisis episodes, including trends and bursts in spillovers, and both turn out to be empirically important. In particular, in an analysis of 19 global equity markets from the early 1990s to the present, they find striking evidence of divergent behavior in the dynamics of return spillovers vs. volatility ...
Discussion Paper
International evidence on business cycle duration dependence
We provide an investigation of duration dependence in prewar business expansions, contractions, and whole cycles for France, Germany, and Great Britain. Our results, obtained using both nonparametric and parametric procedures, generally indicate the presence of positive duration dependence in expansions and whole cycles but not in contractions. Our results corroborate those of our earlier studies of the United States.
Working Paper
Real-time price discovery in global stock, bond and foreign exchange markets
Using a unique high-frequency futures dataset, we characterize the response of U.S., German and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. We find that news produces conditional mean jumps; hence high-frequency stock, bond and exchange rate dynamics are linked to fundamentals. Equity markets, moreover, react differently to news depending on the stage of the business cycle, which explains the low correlation between stock and bond returns when averaged over the cycle. Hence our results qualify earlier work suggesting that bond markets react most ...
Working Paper
On cointegration and exchange rate dynamics
Working Paper
Optimal prediction under asymmetric loss
Prediction problems involving asymmetric loss functions arise routinely in many fields, yet the theory of optimal prediction under asymmetric loss is not well developed. We study the optimal prediction problem under general loss structures and characterize the optimal predictor. We compute it numerically in less tractable cases. A key theme is that the conditionally optimal forecast is biased under asymmetric loss and that the conditionally optimal amount of bias is time-varying in general and depends on higher-order conditional moments. Thus, for example, volatility dynamics (e.g., GARCH ...
Working Paper
On the Aggregation of Probability Assessments: Regularized Mixtures of Predictive Densities for Eurozone Inflation and Real Interest Rates
We propose methods for constructing regularized mixtures of density forecasts. We explore a variety of objectives and regularization penalties, and we use them in a substantive exploration of Eurozone inflation and real interest rate density forecasts. All individual inflation forecasters (even the ex post best forecaster) are outperformed by our regularized mixtures. From the Great Recession onward, the optimal regularization tends to move density forecasts’ probability mass from the centers to the tails, correcting for overconfidence.