The usual index of leading indicators has constant weights on its components and is therefore implicitly premised on the assumption that the dynamical properties of the economy remain the same over time and across phases of the business cycle. We explore the possibility that the business cycle...

Evaluation of forecast optimality in economics and finance has almost exclusively been conducted under the assumption of mean squared error loss. Under this loss function optimal forecasts should be unbiased and forecast errors should be serially uncorrelated at the single period horizon with...

A common problem in out-of-sample prediction is that there are potentially many relevant predictors that individually have only weak explanatory power. We propose bootstrap aggregation of pre-test predictors (or bagging for short) as a means of constructing forecasts from multiple regression...

Recently financial econometricians have shifted their attention from point and interval forecasts to density forecasts mainly to address the issue of the huge loss of information that results from depicting portfolio risk by a measure of dispersion alone. One of the major problems in this area...

In real time forecasting, the sample is usually split into an estimation period of R observations and a prediction period of P observations, where T=R+P. Parameters are often estimated in a recursive manner, initially using R observations, then R+1 observations and so on until T-1 observations...

Recently financial econometricians have shifted their attention from point and interval forecasts to density forecasts mainly to address the issue of the huge loss of information that results from depicting portfolio risk by a measure of dispersion alone. One of the major problems in this area...

The present paper is related to the recent discussion about the efficiency of the Reserve Federal Bank on investment decisions. Our aim is not to propose an optimal policy rule but rather to appreciate and to understand the link between the monetary interventions of the FED and capital...

We compare the performance of a currency board, inflation targeting, and dollarization in a small, open developing economy with a liberalized capital account. We focus on the transmission of shocks to currency and country risk premia and on the role of fluctuations in premia in the propagation...

In this paper we incorporate the term structure of interest rates in a standard inflation forecast targeting framework. Learning about the transmission process of monetary policy is introduced by having heterogeneous agents - i.e. the central bank and private agents - who have different...

There have been several instances over the past 40 years when large movements in the unemployment rate have elicited little response in the inflation rate. Such instances, while casting doubt on the tradeoff implied by the linear Phillips curve, are also associated with large inflation...