In this paper, we exploit the heterogeneity in the forecasts obtained by estimating different factor models to measure forecast uncertainty. Our approach is simple and intuitive. It consists first in selecting all the models that outperform some benchmark model, and then in constructing an...

Can we use newspaper articles to forecast economic activity? Our answer is yes and, to this end, we propose a brand new economic dictionary in Italian with valence shifters, and we apply it to a corpus of about two million articles from four popular newspapers. We produce a set of high-frequency...

The aim of the paper is to estimate a reliable quarterly time-series of potential output for the Italian economy, exploiting four alternative approaches: a Bayesian unobserved component method, a univariate time-varying autoregressive model, a production function approach and a structural VAR....

This paper proposes the use of Bayesian model averaging (BMA) as a tool to select the predictors' set for bridge models. BMA is a computationally feasible method that allows us to explore the model space even in the presence of a large set of candidate predictors. We test the performance of BMA...

The paper develops an early warning system to identify banks that could face liquidity crises. To obtain a robust system for measuring banks’ liquidity vulnerabilities, we compare the predictive performance of three models – logistic LASSO, random forest and Extreme Gradient Boosting – and...

The size and power properties of several tests of equal Mean Square Prediction Error (MSPE) and of Forecast Encompassing (FE) are evaluated, using Monte Carlo simulations, in the context of dynamic regressions. For nested models, the F-type test of forecast encompassing proposed by Clark and...

Pre-existing public debt vulnerabilities have been exacerbated by the effects of the pandemic, raising the risk of fiscal crises in emerging markets and low-income countries. This underscores the importance of models designed to capture the main determinants of fiscal distress episodes and...

Business investment is a very important variable for short- and medium-term economic analysis, but it is volatile and difficult to predict. Qualitative business survey data are widely used to provide indicators of economic activity ahead of the publication of official data. Traditional...

The aim of the paper is to understand the interaction between market and credit risk. Using a comprehensive set of Italian data, we apply a factor model to identify the common sources of risk driving fluctuations in the real and financial sectors. The common latent factors are then inserted in a...