In this paper, we present a forecasting technique that uses contemporaneous correlations for forecasting in a time series model when only a subset of the variables are available for the current period. This method potentially provides more accurate forecasts than the standard time series...

The purposes of this study are two: 1) to compare the forecasting abilities of the three methods: univariate autoregressive integrated moving average (ARIMA), multivariate autoregressive integrated moving average (MARIMA), and vector autoregression (both unconstrained — VAR — and Bayesian...

The estimation of large vector autoregressions with stochastic volatility using standard methods is computationally very demanding. In this paper we propose to model conditional volatilities as driven by a single common unobserved factor. This is justified by the observation that the pattern of...

This paper compares alternative models of time-varying macroeconomic volatility on the basis of the accuracy of point and density forecasts of macroeconomic variables. In this analysis, we consider both Bayesian autoregressive and Bayesian vector autoregressive models that incorporate some form...

We estimate the process underlying the pricing of American options by using higher-order lattices combined with a multigrid method. This paper also tests whether the risk-neutral densities given from American options provide a good forecasting tool. We use a nonparametric test of the densities...

This paper develops and estimates an equilibrium model of the term structures of nominal and real interest rates. The term structures are driven by state variables that include the short term real interest rate, expected inflation, a factor that models the changing level to which inflation is...

A comparison showing that the transition costs of indexing inflation (a major obstacle to monetary policy reform) are approximately equal to the minor shoe-leather benefits of having price stability.

This paper addresses the output-price volatility puzzle by studying the interaction of optimal monetary policy and agents' beliefs. We assume that agents choose their information acquisition rate by minimizing a loss function that depends on expected forecast errors and information costs....

A presentation of a sectoral-shifts model with money that explains the short-run Phillips curve and predicts a long-run positive relationship between inflation and unemployment.

The present paper studies optimal monetary policy when the representative agent assumption is abandoned and financial wealth heterogeneity across households is introduced. Incomplete markets make households incapable of perfectly insuring against interest rate and inflation risk, creating a...