Small–scale VARs are widely used in macroeconomics for forecasting U.S. output, prices, and interest rates. However, recent work suggests these models may exhibit instabilities. As such, a variety of estimation or forecasting methods might be used to improve their forecast accuracy. These include using different observation windows for estimation, intercept correction, time–varying parameters, ...

We ask whether the di¤erent types of forecasts made by individual survey respondents are mutually consistent, using the SPF survey data. We compare the point forecasts and central tendencies of probability distributions matched by individual respondent, and compare the forecast probabilities of declines in output with the probabilities implied by the probability distributions. When the expected...

UNLABELLED The objective of this paper is to verify the hypotheses presented in the literature on the causal relationship between inflation and its uncertainty, for the newest EU countries. To ensure the robustness of the results, in the study four models for inflation uncertainty are estimated in parallel: ARCH (1), GARCH (1,1), EGARCH (1,1,1) and PARCH (1,1,1). The Granger method is used to t...

This paper combines a data-rich environment with machine learning algorithm to provide new estimates of time-varying systematic expectational errors (“belief distortions”) embedded in survey responses. We find sizable distortions even for professional forecasters, all respondent-types overweighting the implicit judgmental component their forecasts relative what can be learned from publicly avai...

We develop a theory of low-frequency movements in inflation expectations, and use it to interpret joint dynamics expectations for the United States other countries over postwar period. In our theory, long-run are endogenous. They driven by short-run surprises, way that depends on recent forecasting performance monetary policy. This distinguishes from common explanations properties inflation. Th...

Recent work suggests VAR models of output, inflation, and interest rates may be prone to instabilities. In the face of such instabilities, a variety of estimation or forecasting methods might be used to improve the accuracy of forecasts from a VAR. The uncertainty inherent in any single representation of instability could mean that combining forecasts from a range of approaches will improve for...

The optimal weights on indicators in models with partial information about the state of the economy and forward-looking variables are derived and interpreted, both for equilibria under discretion and under commitment. An example of optimal monetary policy with a partially observable potential output and a forward-looking indicator is examined. The optimal response to the optimal estimate of pot...

This paper provides empirical evidence for standard economic equilibrium relationships and shows that the estimated disequilibrium adjustment mechanisms appear running counter to intuition. For example, the German interest rate seems to adjust to Swiss rates but not vice versa implying a driving role of the Swiss with respect to the German rates. It is argued that this phenomenon is due to the ...

We derive forecasts for Markov switching models that are optimal in the MSFE sense by means of weighting observations. We provide analytic expressions of the weights conditional on the Markov states and conditional on state probabilities. This allows us to study the e↵ect of uncertainty around states on forecasts. It emerges that, even in large samples, forecasting performance increases substan...