This study proposes a data-based algorithm to select a subset of indicators from a large data set with a focus on forecasting recessions. The algorithm selects leading indicators of recessions based on the forecast encompassing principle and combines the forecasts. An application to U.S. data...

This paper provides an assessment of the consistency of unemployment and output forecasts. We show that, consistent with Okun’s Law, forecasts of real GDP growth and the change in unemployment are negatively correlated. The Okun coefficient—the responsiveness of unemployment to growth—from...

A simple criterion based on the properties of the forecast error is presented to evaluate the accuracy of forecasts. The efficiency conditions of an optimization problem are used to show that under rational expectations the standard statistical conditions are necessary, but not sufficient to...

Consensus forecasts are inefficient, over-weighting older information already in the public domain at the expense of new private information, when individual forecasters have different information sets. Using a cross-country panel of growth forecasts and new methodological insights, this paper...

Inflation has been below the Federal Reserve's target for much of the past 20 years, creating worries that inflation may be deanchoring from the FOMC's target. This paper uses a factor model that incorporates information from professional forecasters, household and business surveys, and the...

This paper introduces the quantile regression- based Distance-to-Default to Probability of Default (DD-PD) mapping, which links individual firms' DD to their real world PD. Since changes in the DD depend on a handful of parameters, the mapping easily accommodates shocks arising from quantitative...

In recent years, term premia have been very low and sometimes even negative. Now, with the United States economy growing above potential, inflationary pressures are on the rise. Term premia are very sensitive to the expected future path of growth, inflation, and monetary policy, and an inflation...