Copyright (c) 2009 All rights reserved. http://works.bepress.com/shaun_vahey Recent documents in Shaun Vahey en-us Thu, 05 Nov 2009 16:50:37 PST 3600 http://works.bepress.com/shaun_vahey/18 http://works.bepress.com/shaun_vahey/18 Mon, 05 Oct 2009 20:09:47 PDT A popular macroeconomic forecasting strategy takes combinations across many models to hedge against model instabilities of unknown timing; see (among others) Stock andWatson (2004) and Clark and McCracken (2009). In this paper, we examine the effectiveness of recursive-weight and equal-weight combination strategies for density forecasting using a time-varying Phillips curve relationship between inflation and the output gap. The densities reflect the uncertainty across a large number of models using many statistical measures of the output gap, allowing for a single structural break of unknown timing. We use real-time data for the US, Australia, New Zealand and Norway. Our main finding is that the recursive-weight strategy performs well across the real-time data sets, consistently giving well-calibrated forecast densities. The equal-weight strategy generates poorly-calibrated forecast densities for the US and Australian samples. There is little difference between the two strategies for our New Zealand and Norwegian data. We also find that the ensemble modeling approach performs more consistently with real-time data than with revised data in all four countries. Shaun P. Vahey Work in Progress http://works.bepress.com/shaun_vahey/17 http://works.bepress.com/shaun_vahey/17 Mon, 05 Oct 2009 19:55:45 PDT We construct ensemble predictives for inflation in Australia based on the out of sample forecast performance of many component models, where each component model uses a particular disaggregate inflation series. Following Ravazzolo and Vahey (2009), the disaggregate ensemble can be interpreted as a measure of core inflation. We demonstrate that the ensemble forecast densities for measured inflation using disaggregate information by city and by sector are well calibrated. The resulting density forecasts outperform considerably those from a benchmark autoregressive model. And the point forecasts are competitive. From a structural perspective, the disaggregate ensemble core inflation measure suggests that the more traditional weighted median and trimmed mean measures periodically understate and overstate inflationary pressures in Australia. Shaun P. Vahey Work in Progress http://works.bepress.com/shaun_vahey/16 http://works.bepress.com/shaun_vahey/16 Mon, 05 Oct 2009 19:50:30 PDT We propose a methodology for producing density forecasts for the output gap in real time using a large number of vector autoregessions in inflation and output gap measures. Density combination utilizes a linear mixture of experts framework to produce potentially non-Gaussian ensemble densities for the unobserved output gap. In our application, we show that data revisions alter substantially our probabilistic assessments of the output gap using a variety of output gap measures derived from univariate detrending filters. The resulting ensemble produces well-calibrated forecast densities for US inflation in real time, in contrast to those from simple univariate autoregressions which ignore the contribution of the output gap. Combining evidence from both linear trends and more flexible univariate detrending filters induces strong multi- modality in the predictive densities for the unobserved output gap. The peaks associated with these two detrending methodologies indicate output gaps of opposite sign for some observations, reflecting the pervasive nature of model uncertainty in our US data. Shaun P. Vahey Work in Progress http://works.bepress.com/shaun_vahey/15 http://works.bepress.com/shaun_vahey/15 Mon, 05 Oct 2009 19:44:06 PDT This article contributes new time series for studying the U.K. economy during World War I and the interwar period. The time series are per capita hours worked and average tax rates of capital income, labor income, and consumption. Uninterrupted time series of these variables are provided for an annual sample that runs from 1913 to 1938. We highlight the usefulness of these time series with several empirical applications. We use per capita hours worked in a growth accounting exercise to measure the contributions of capital, labor, and productivity to output growth. The average tax rates are employed in a Bayesian model averaging experiment to reevaluate the Benjamin and Kochin (1979) regression. Shaun P. Vahey Work in Progress http://works.bepress.com/shaun_vahey/14 http://works.bepress.com/shaun_vahey/14 Mon, 05 Oct 2009 19:40:28 PDT We argue that the next generation of macro modellers at Inflation Targeting central banks should adapt a methodology from the weather forecasting literature known as `ensemble modelling'. In this approach, uncertainty about model specifications (e.g., initial conditions, parameters, and boundary conditions) is explicitly accounted for by constructing ensemble predictive densities from a large number of component models. The components allow the modeller to explore a wide range of uncertainties; and the resulting ensemble `integrates out' these uncertainties using time-varying weights on the components. We provide two examples of this modelling strategy: (i) forecasting inflation with a disaggregate ensemble; and (ii) forecasting inflation with a DSGE ensemble. Shaun P. Vahey Work in Progress http://works.bepress.com/shaun_vahey/13 http://works.bepress.com/shaun_vahey/13 Wed, 05 Nov 2008 15:58:29 PST Shaun P. Vahey Published Work http://works.bepress.com/shaun_vahey/12 http://works.bepress.com/shaun_vahey/12 Wed, 05 Nov 2008 15:54:35 PST Shaun P. Vahey Published Work http://works.bepress.com/shaun_vahey/11 http://works.bepress.com/shaun_vahey/11 Tue, 05 Aug 2008 19:35:24 PDT Shaun P. Vahey Published Work http://works.bepress.com/shaun_vahey/10 http://works.bepress.com/shaun_vahey/10 Tue, 05 Aug 2008 19:33:29 PDT Shaun P. Vahey Published Work http://works.bepress.com/shaun_vahey/9 http://works.bepress.com/shaun_vahey/9 Tue, 05 Aug 2008 19:30:43 PDT Shaun P. Vahey Published Work