We develop a non-linear forecast combination rule based on copulas that incorporate the dynamic interaction between individual predictors. This approach is optimal in the sense that the resulting combined forecast produces the highest discriminatory power as measured by the receiver operating...

In this paper, we examine the role of global and domestic credit supply shocks in macroeconomic fluctuations for Emerging Markets. For this purpose, we impose a set of zero and sign restrictions within a medium-scale Bayesian Vector Auto-Regressive model. Quarterly data from South Africa and G-7...

This paper derives new theoretical results for forecasting with Global VAR (GVAR) models. It is shown that the presence of a strong unobserved common factor can lead to an undeter-mined GVAR model. To solve this problem, we propose augmenting the GVAR with additional proxy equations for the...

Over the last decade, the topic of regional economic forecasting has become increasingly prevalent in academic literature. The most striking problem in this context is data availability at a regional level. However, considerable methodological improvements have been made to address this problem....

From a theoretical perspective, the output gap is probably the most comprehensive and convincing concept to describe the cyclical position of an economy. Unfortunately, for practical purposes, the concept depends on the determination of potential output, which is an inherently unobservable...

The use of large datasets for macroeconomic forecasting has received a great deal of interest recently. Boosting is one possible method of using high-dimensional data for this purpose. It is a stage-wise additive modelling procedure, which, in a linear specification, becomes a variable selection...

This paper unveils a new resource for macroeconomic research: a long-run dataset covering disaggregated bank credit for 17 advanced economies since 1870. The new data show that the share of mortgages on banks’ balance sheets doubled in the course of the 20th century, driven by a sharp rise of...

Recent articles suggest that a Bayesian vector autoregression (BVAR) with shrinkage is a good forecast device even when the number of variables is large. In this paper we evaluate different variants of the BVAR with respect to their forecast accuracy for euro area real GDP growth and HICP...

In this paper, we assess the accuracy of macroeconomic forecasts at the regional level using a unique data set at quarterly frequency. We forecast gross domestic product (GDP) for two German states (Free State of Saxony and Baden-Württemberg) and Eastern Germany. We overcome the problem of a...

We show that the standard Value Function Iteration (VFI) algorithm has difficulties approximating models with jump discontinuities in policy functions. We find that VFI fails to accurately identify the location and size of jump discontinuities while other methods - such as the Endogenous Grid...