We use a vector error correction model to study the long-term relationship between aggregate expected default frequency and the macroeconomic development, i.e. CPI, industry production and short-term interest rate. The model is used to forecast the median expected default frequency of the...

We consider forecast combination and, indirectly, model selection for VAR models when there is uncertainty about which variables to include in the model in addition to the forecast variables. The key difference from traditional Bayesian variable selection is that we also allow for uncertainty...

World power and gas markets have a natural relationship with global tradable carbon permits markets, including the U.S. Clean Air Act Amendments and the EU Emissions Trading Scheme, the latter officially launched in January 2005. Electric utilities operate their power plants based in part on the...

Motivated by economic-theory concepts - the Fisher hypothesis and the theory of the term structure - we consider a small set of simple bivariate closed-loop time-series models for the prediction of price inflation and of long- and short-term interest rates. The set includes vector...

This paper studies the relation between macroeconomic fluctuations and corporate defaults while conditioning on industry affiliation and an extensive set of firm-specific factors. Using a logit approach on a panel data set for all incorporated Swedish businesses over 1990-2002, we find strong...

In this paper we undertake an out-of-sample evaluation of the ability of a model to forecast the Swedish Krona’s real and nominal effective exchange rate, using a cointegrating relation between the real exchange rate, relative output, terms of trade and net foreign assets (or alternatively the...

We develop an econometric methodology to infer the path of risk premia from large unbalanced panel of individual stock returns. We estimate the time-varying risk premia implied by conditional linear asset pricing models where the conditioning includes instruments common to all assets and asset...

We present a hybrid model for diagnosis and critical time forecasting of real estate bubbles. The model combines two elements: 1) the Log Periodic Power Law (LPPL) model to describe endogenous price dynamics originated from positive feedback loops between economic agents; and 2) a diffusion...