This paper proposes new methodologies for evaluating out-of-sample forecasting performance that are robust to the choice of the estimation window size. The methodologies involve evaluating the predictive ability of forecasting models over a wide range of window sizes. We show that the tests...

In deciding a monetary policy stance, central bankers need to evaluate carefully the risks the current economic situation poses to price stability. We propose to regard the central banker as a risk manager who aims to contain inflation within pre-specified bounds. We develop formal tools of risk...

While forecasting is a common practice in academia, government and business alike, practitioners are often left wondering how to choose the sample for estimating forecasting models. When we forecast inflation in 2014, for example, should we use the last 30 years of data or the last 10 years of...

We consider the problem of optimally combining individual forecasts of gross domestic product (GDP) and inflation from the Survey of Professional Forecasters (SPF) dataset for the Euro Area. Contrary to the common practice of using equal combination weights, we compute optimal weights which...

The Paper presents a model in which the exogenous money supply causes changes in the inflation rate and the output growth rate. While inflation and growth rate changes occur simultaneously, the inflation acts as a tax on the return to human capital and in this sense induces the growth rate...

Several authors have recently interpreted the ECB's two-pillar framework as separate approaches to forecast and analyse inflation at different time horizons or frequency bands. The ECB has publicly supported this understanding of the framework. This paper presents further evidence on the...

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 serially uncorrelated at the single-period horizon with increasing...