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on Forecasting |
| By: | Brendan P.M. McCabe; Gael M. Martin; David Harris |
| Abstract: | Optimal probabilistic forecasts of integer-valued random variables are derived. The optimality is achieved by estimating the forecast distribution nonparametrically over a given broad model class and proving asymptotic efficiency in that setting. The ideas are demonstrated within the context of the integer autoregressive class of models, which is a suitable class for any count data that can be interpreted as a queue, stock, birth and death process or branching process. The theoretical proofs of asymptotic optimality are supplemented by simulation results which demonstrate the overall superiority of the nonparametric method relative to a misspecified parametric maximum likelihood estimator, in large but .nite samples. The method is applied to counts of wage claim benefits, stock market iceberg orders and civilian deaths in Iraq, with bootstrap methods used to quantify sampling variation in the estimated forecast distributions. |
| Keywords: | Nonparametric Inference; Asymptotic Efficiency; Count Time Series; INAR Model Class; Bootstrap Distributions; Iceberg Stock Market Orders. |
| JEL: | C14 C22 C53 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:msh:ebswps:2009-7&r=for |
| By: | David Peel; Ivan Paya; E Pavlidis |
| Abstract: | This paper deals with the nonlinear modeling and forecasting of the dollar-sterling real exchange rate using a long span of data. Our contribution is threefold. First, we provide significant evidence of smooth transition dynamics in the series by employing a battery of recently developed in-sample statistical tests. Second, we investigate the small sample properties of several evaluation measures for comparing recursive forecasts when one of the competing models is nonlinear. Finally, we run a forecasting race for the post-Bretton Woods era between the nonlinear real exchange rate model, the random walk, and the linear autoregressive model. The winner turns out to be the nonlinear model, against the odds. |
| Keywords: | Real Exchange Rate, Nonlinearity, Robust Linearity Tests, Forecast Evaluation, Bootstrapping. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:lan:wpaper:006075&r=for |
| By: | Daniel Buncic |
| Abstract: | The forecast performance of the empirical ESTAR model of Taylor, Peel and Sarno (2001) is examined for 4 bilateral real exchange rate series over an out-of-sample eval-uation period of nearly 12 years. Point as well as density forecasts are constructed, considering forecast horizons of 1 to 22 steps head. The study finds that no forecast gains over a simple AR(1) specification exist at any of the forecast horizons that are considered, regardless of whether point or density forecasts are utilised in the evaluation. Non-parametric methods are used in conjunction with simulation techniques to learn about the models and their forecasts. It is shown graphically that the nonlinearity in the point forecasts of the ESTAR model decreases as the forecast horizon increases. The non-parametric methods show also that the multiple steps ahead forecast densities are normal looking with no signs of bi-modality, skewness or kurtosis. Overall, there seems little to be gained from using an ESTAR specification over a sim¬ple AR(1) model. |
| Keywords: | Purchasing power parity, regime modelling, non-linear real exchange rate models, ESTAR, forecast evaluation, density forecasts, non-parametric methods. |
| JEL: | C22 C52 C53 F31 F47 |
| Date: | 2009–08–18 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2009_18&r=for |
| By: | Ida Wolden Bache (Norges Bank (Central Bank of Norway)); James Mitchell (National Institute of Economic and Social Research); Francesco Ravazzolo (Norges Bank (Central Bank of Norway)); Shaun P. Vahey (Melbourne Business School) |
| Abstract: | 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 an ensemble DSGE. |
| Keywords: | Ensemble modelling, Forecasting, DSGE models, Density combination |
| JEL: | C11 C32 C53 E37 E52 |
| Date: | 2009–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2009_15&r=for |
| By: | John Galbraith; Simon van Norden |
| Abstract: | This paper applies new diagnostics to the Bank of England’s pioneering density forecasts (fan charts). We compute their implicit probability forecast for annual rates of inflation and output growth that exceed a given threshold (in this case, the target inflation rate and 2.5% respectively.) Unlike earlier work on these forecasts, we measure both their calibration and their resolution, providing both formal tests and graphical interpretations of the results. These results both reinforce earlier evidence on some of the limitations of these forecasts and provide new evidence on their information content. <P>Cet étude développe et applique des nouvelles techniques pour diagnostiquer les prévisions de densité de la Banque d’Angleterre (leur “fan charts”). Nous calculons leurs probabilités implicites pour des taux d’inflation et de croissance du PIB qui dépassent des seuils critiques (soit le taux d’inflation ciblé, soit 2.5%.) En contraste avec des travaux antérieurs sur ces prévisions, nous gaugeons leur calibration aussi bien que leur résolution, en donnant des tests formels et des interprétations graphiques. Les résultats renforcent des conclusions déjà existant sur les limites de ces prévisions et ils donnent de nouvelles évidences sur leurs valeurs ajoutées. |
| Keywords: | calibration, density forecast, probability forecast, resolu, calibration, prévisions de densité, probabilités implicites, résolution. |
| Date: | 2009–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2009s-36&r=for |
| By: | Jonas Dovern (Kiel Economics Research & Forecasting, Fraunhoferstr. 13, D-24118 Kiel, Germany.); Ulrich Fritsche (University of Hamburg, Edmund-Siemers-Allee 1, D-20146 Hamburg, Germany.); Jiri Slacalek (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | Using the Consensus Economics dataset with individual expert forecasts from G7 countries we investigate determinants of disagreement (crosssectional dispersion of forecasts) about six key economic indicators. Disagreement about real variables (GDP, consumption, investment and unemployment) has a distinct dynamic from disagreement about nominal variables (inflation and interest rate). Disagreement about real variables intensifies strongly during recessions, including the current one (by about 40 percent in terms of the interquartile range). Disagreement about nominal variables rises with their level, has fallen after 1998 or so (by 30 percent), and is considerably lower under independent central banks (by 35 percent). Cross-sectional dispersion for both groups increases with uncertainty about the underlying actual indicators, though to a lesser extent for nominal series. Country-by-country regressions for inflation and interest rates reveal that both the level of disagreement and its sensitivity to macroeconomic variables tend to be larger in Italy, Japan and the United Kingdom, where central banks became independent only around the mid-1990s. These findings suggest that more credible monetary policy can substantially contribute to anchoring of expectations about nominal variables; its effects on disagreement about real variables are moderate. JEL Classification: E31, E32, E37, E52, C53. |
| Keywords: | disagreement, survey expectations, monetary policy, forecasting. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091082&r=for |
| By: | McAleer, M.; Jimenez-Marin, J-. A.; Perez-Amaral, T. (Erasmus Econometric Institute) |
| Abstract: | When dealing with market risk under the Basel II Accord, variation pays in the form of lower capital requirements and higher profits. Typically, GARCH type models are chosen to forecast Value-at-Risk (VaR) using a single risk model. In this paper we illustrate two useful variations to the standard mechanism for choosing forecasts, namely: (i) combining different forecast models for each period, such as a daily model that forecasts the supremum or infinum value for the VaR; (ii) alternatively, select a single model to forecast VaR, and then modify the daily forecast, depending on the recent history of violations under the Basel II Accord. We illustrate these points using the Standard and Poor’s 500 Composite Index. In many cases we find significant decreases in the capital requirements, while incurring a number of violations that stays within the Basel II Accord limits. |
| Keywords: | risk management;violations;aggressive risk strategy;conservative risk strategy;value-at-risk forecast |
| Date: | 2009–08–18 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:eureir:1765016512&r=for |
| By: | Theologos Dergiades (Department of Economics, University of Macedonia); Apostolos Dasilas (Department of Accounting and Finance, University of Macedonia) |
| Abstract: | In this paper we try to model the adoption pattern of mobile telecommunication services into the Greek market for the period from 1993 to 2005. Two separate sigmoid curves, the Gompertz and the Logistic, are fitted to the observed number of subscribers by means of non-linear least squares. The in-sample fit to data favoured the use of the Logistic curve in describing the diffusion process, fact which is further supported by Frances’ parametric test (1994b). The dominance of the Logistic curve over the Gompertz is also verified via a pseudo out-of-sample forecasting exercise. Furthermore, an attempt is made to predict the expected number of subscribers up to 2015, solely based on the Logistic curve. Taking into account the prediction’s uncertainty, the variance of the forecast errors is calculated utilising the non-parametric bootstrap method. Our empirical results reached to three conclusions. First, the introduction of the pre-paid mobile telephony in 1997 along with the entry of the third mobile operator in 1998 has boosted the diffusion process in Greece; second, the levelling-off process in the diffusion of mobile phones has already begun; finally, the average expected growth rate in new subscribers is less than half percent for the period between 2006 and 2015. |
| Keywords: | Electricity Demand, ARDL, Cointegration. |
| JEL: | O33 L96 C53 C15 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:mcd:mcddps:2009_13&r=for |
| By: | Jan-Egbert Sturm (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Jakob de Haan (Faculty of Economics and Business, University of Groningen, The Netherlands) |
| Abstract: | Nowadays, it is widely believed that greater disclosure and clarity over policy may lead to greater predictability of central bank actions. We examine whether communication by the European Central Bank (ECB) adds information compared to the information provided by a Taylor rule model in which real time expected inflation and output are used. We use five indicators of ECB communication that are all based on the ECB President’s introductory statement at the press conference following an ECB policy meeting. Our results suggest that even though the indicators are sometimes quite different from one another, they add information that helps predict the next policy decision of the ECB. Furthermore, also when the interbank rate is included in our Taylor rule model, the ECB communication indicators remain significant. |
| Keywords: | ECB, central bank, communication, Taylor rule |
| JEL: | E52 E53 E3 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:09-236&r=for |