Diffusion indexes based on dynamic factors have recently been advocated by Stock and Watson (1998), and further used to perform forecasting tests by the same authors on US data. This technique is explored for the euro area using a multi-country data set and a broad array of variables, in order...

This paper reviews recently proposed likelihood ratio tests of goodness-of-fit and independence of interval forecasts. It recasts them in the framework of Pearson chi-squared statistics, and considers their extension to density forecasts and their exact small-sample distributions. The use of the...

Monitoring and forecasting price developments in the euro area is essential in the light of the second pillar of the ECB's monetary policy strategy. This study analyses whether the forecasting accuracy of forecasting aggregate euro area inflation can be improved by aggregating forecasts of...

In this paper we investigate whether the forecast of the HICP components (indirect approach) improves upon the forecast of overall HICP (direct approach) and whether the aggregation of country forecasts improves upon the forecast of the euro-area as a whole, considering the four largest euro...

This paper examines possible explanations for observed differences in the transmission of euro area monetary policy in central bank large-scale macroeconomic models. In particular it considers the extent to which these differences are due to differences in the underlying economies or (possibly...

The accession of ten countries into the European Union makes the forecasting of their key macroeconomic indicators an exercise of some importance. Because of the transition period, only short spans of reliable time series are available, suggesting the adoption of simple time series models as...

This paper documents a new stylized fact of the greater macroeconomic stability of the U.S. economy over the last two decades. Using 131 monthly time series, three popular statistical methods and the forecasts of the Federal Reserve’s Greenbook and the Survey of Professional Forecasters, we...

Economic policy makers, international organisations and private-sector forecasters commonly use short-term forecasts of real GDP growth based on monthly indicators, such as industrial production, retail sales and confidence surveys. An assessment of the reliability of such tools and of the...

This paper contributes to the old theme of testing for rationality of inflation expectations in surveys, using two very different surveys in parallel. Focusing on the euro area and using two well-known surveys that include questions on inflation expectations, the Consensus Forecast survey and...

This paper explores the role that inflation forecasts play in the uncertainty surrounding the estimated effects of alternative monetary rules on unemployment dynamics in the euro area and the US. We use the inflation forecasts of 8 competing models in a standard Bayesian VAR to analyse the size...