The Asian financial crisis broke out in Thailand in July 1997, and rapidly spread throughout the neighboring countries. An important question then arises? Is it possible to predict next financial crisis? If yes, then what are the predictors? The answer lies in combined usage of economic theory...

In this paper we develop an analytically solvable and structurally estimable economic geography model and apply it to predict migration flows for the period following the CEE’s integration with the EU. The main innovation of our approach is that it endogenises both explanatory variables and...

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Forecasters and applied econometricians are often interested in comparing the predictive accuracy of nested competing models. A leading example of nestedness is when predictive ability is equated with ?out-of-sample Granger causality?. In particular, it is often of interest to assess whether...

In recent years it has become apparent that many of the classical testing procedures used to select amongst alternative economic theories and economic models are not realistic. In particular, researchers have become more aware of the fact that parameter estimation error and data dependence play...

This Chapter discusses estimation, specification testing, and model selection of predictive density models. In particular, predictive density estimation is briefly discussed. And a variety of different specifications and model evaluation tests due to various authors including Christoffersen and...

This paper addresses the notion that many fractional I(d) processes may fall into the ?empty box? category, as discussed in Granger (1999). We present ex ante forecasting evidence based on an updated version of the absolute returns series examined by Ding, Granger and Engle (1993) that suggests...

This paper outlines testing procedures for assessing the relative out-of-sample predictive accuracy of multiple conditional distribution models. The tests that are discussed are based on either the comparison of entire conditional distributions or the comparison of predictive confidence...

In economics, common factors are often assumed to underlie the co-movements of a set of macroeconomic variables. For this reason, many authors have used estimated factors in the construction of prediction models. In this paper, we begin by surveying the extant literature on diffusion indexes. We...

Central banks regularly monitor select financial and macroeconomic variables in order to obtain early indication of the impact of monetary policies. This practice is discussed on the Federal Reserve Bank of New York website, for example, where one particular set of macroeconomic indicators is...