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Working Paper
Tests of Conditional Predictive Ability: Existence, Size, and Power
McCracken, Michael W. (2020-12-18)
We investigate a test of conditional predictive ability described in Giacomini and White (2006; Econometrica). Our main goal is simply to demonstrate existence of the null hypothesis and, in doing so, clarify just how unlikely it is for this hypothesis to hold. We do so using a simple example of point forecasting under quadratic loss. We then provide simulation evidence on the size and power of the test. While the test can be accurately sized we find that power is typically low.
Working Papers , Paper 2020-050

Working Paper
Evaluating Conditional Forecasts from Vector Autoregressions
McCracken, Michael W.; Clark, Todd E. (2014-10-02)
Many forecasts are conditional in nature. For example, a number of central banks routinely report forecasts conditional on particular paths of policy instruments. Even though conditional forecasting is common, there has been little work on methods for evaluating conditional forecasts. This paper provides analytical,Monte Carlo, and empirical evidence on tests of predictive ability for conditional forecasts from estimated models. In the empirical analysis, we consider forecasts of growth, unemployment, and inflation from a VAR, based on conditions on the short-term interest rate. Throughout ...
Working Papers (Old Series) , Paper 1413

Working Paper
The Uniform Validity of Impulse Response Inference in Autoregressions
Kilian, Lutz; Inoue, Atsushi (2019-08-11)
Existing proofs of the asymptotic validity of conventional methods of impulse response inference based on higher-order autoregressions are pointwise only. In this paper, we establish the uniform asymptotic validity of conventional asymptotic and bootstrap inference about individual impulse responses and vectors of impulse responses when the horizon is fixed with respect to the sample size. For inference about vectors of impulse responses based on Wald test statistics to be uniformly valid, lag-augmented autoregressions are required, whereas inference about individual impulse responses is ...
Working Papers , Paper 1908

Report
Inflation in the Great Recession and New Keynesian models
Giannoni, Marc; Del Negro, Marco; Schorfheide, Frank (2013)
It has been argued that existing DSGE models cannot properly account for the evolution of key macroeconomic variables during and following the recent great recession. We challenge this argument by showing that a standard DSGE model with financial frictions available prior to the recent crisis successfully predicts a sharp contraction in economic activity along with a modest and protracted decline in inflation following the rise in financial stress in the fourth quarter of 2008. The model does so even though inflation remains very dependent on the evolution of economic activity and of monetary ...
Staff Reports , Paper 618

Working Paper
A Note on the Finite Sample Bias in Time Series Cross-Validation
Lusompa, Amaze (2025-11-24)
It is well known that model selection via cross validation can be biased for time series models. However, many researchers have argued that this bias does not apply when using cross-validation with vector autoregressions (VAR) or with time series models whose errors follow a martingale-like structure. I show that even under these circumstances, performing cross-validation on time series data will still generate bias in general.
Research Working Paper , Paper RWP 25-17

Working Paper
On Model Aggregation and Forecast Combination
Massoumi, Esfandiar; Gospodinov, Nikolay (2025-10-09)
Policy makers express their views and decisions via the lens of a particular model or theory. But since any model is a highly stylized representation of the unknowable object of interest, all these models are inherently misspecified, and the resulting ambiguity injects uncertainty in the decision-making process. We argue that entropy-based aggregation is a convenient device to confront this uncertainty and summarize relevant information from a set of candidate models and forecasts. The proposed aggregation tends to robustify the decision-making process to various sources of risks and ...
FRB Atlanta Working Paper , Paper 2025-12

Working Paper
General Aggregation of Misspecified Asset Pricing Models
Maasoumi, Esfandiar; Gospodinov, Nikolay (2017-11-01)
This paper proposes an entropy-based approach for aggregating information from misspecified asset pricing models. The statistical paradigm is shifted away from parameter estimation of an optimally selected model to stochastic optimization based on a risk function of aggregation across models. The proposed method relaxes the perfect substitutability of the candidate models, which is implicitly embedded in the linear pooling procedures, and ensures that the aggregation weights are selected with a proper (Hellinger) distance measure that satisfies the triangle inequality. The empirical results ...
FRB Atlanta Working Paper , Paper 2017-10

Working Paper
Discussion of "Dynamic Causal Effects in a Nonlinear World: the Good, the Bad, and the Ugly''
Herbst, Edward P.; Johannsen, Benjamin K. (2025-08-05)
This comment discusses Kolesár and Plagborg-Møller's (2025) finding that the standard linear local projection (LP) estimator recovers the average marginal effect (AME) even in nonlinear settings. We apply and discuss a subset their results using a simple nonlinear time series model, emphasizing the role of the weighting function and the impact of nonlinearities on small-sample properties.
Finance and Economics Discussion Series , Paper 2025-058

Working Paper
Firms and the Gender Wage Gap: A Comparison of Eleven Countries
Bertheau, Antoine; Hijzen, Alexander; Muraközy, Balázs; Palladino, Marco; Kunze, Astrid; Barreto, César; Nordström Skans, Oskar; Lochner, Benjamin; Gulumser, Dogan; Lombardi, Stefano; Lassen, Anne Sophie; Lachowska, Marta; Lattanzio, Salvatore; Meekes, Jordy (2025-12-08)
We quantify the role of gender-specific firm wage premiums in explaining the private-sector gender gap in hourly wages using a harmonized research design across 11 matched employer-employee datasets—ten European countries and Washington state, USA. These premiums contribute to the gender wage gap through two channels: women’s concentration in lower-paying firms (sorting) and women receiving lower premiums than men within the same firm (pay-setting). We find that firm wage premiums account for 10 to 30 percent of the gender wage gap. While both mechanisms matter, sorting is the predominant ...
Working Paper Series , Paper WP 2025-24

Working Paper
Real-Time Forecasting and Scenario Analysis using a Large Mixed-Frequency Bayesian VAR
Sekhposyan, Tatevik; Owyang, Michael T.; McCracken, Michael W. (2020-04-10)
We use a mixed-frequency vector autoregression to obtain intraquarter point and density forecasts as new, high frequency information becomes available. This model, delineated in Ghysels (2016), is specified at the lowest sampling frequency; high frequency observations are treated as different economic series occurring at the low frequency. As this type of data stacking results in a high-dimensional system, we rely on Bayesian shrinkage to mitigate parameter proliferation. We obtain high-frequency updates to forecasts by treating new data releases as conditioning information. The same ...
Working Papers , Paper 2015-030

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