This paper introduces heterogeneous households into an otherwise standard sticky-price model with industry-specific labor markets. Households differ in labor incomes and asset markets are incomplete. I show that household heterogeneity affects equilibrium dynamics nontrivially by amplifying...

In this chapter, we discuss the use of mixed frequency models and diffusion index approximation methods in the context of prediction. In particular, select recent specification and estimation methods are outlined, and an empirical illustration is provided wherein U.S. unemployment forecasts are...

The technique of using densities and conditional distributions to carry out consistent specification testing and model selection amongst multiple diffusion processes have received considerable attention from both financial theoreticians and empirical econometricians over the last two decades....

In recent years, an impressive body or research on predictive accuracy testing and model comparison has been published in the econometrics discipline. Key contributions to this literature include the paper by Diebold and Mariano (DM: 1995) that sets the groundwork for much of the subsequent work...

Central banks regularly monitor select financial and macroeconomic variables in order to obtain early indication of the impact of monetary policies. This practice is discussed on the Federal Reserve Bank of New York website, for example, where one particular set of macroeconomic "indicators" is...

This paper develops tests for comparing the accuracy of predictive densities derived from (possibly misspecified) diffusion models. In particular, we first outline a simple simulation-based framework for constructing predictive densities for one-factor and stochastic volatility models. Then, we...

In economics, common factors are often assumed to underlie the co-movements of a set of macroeconomic variables. For this reason, many authors have used estimated factors in the construction of prediction models. In this paper, we begin by surveying the extant literature on diffusion indexes. We...

In this chapter we discuss model selection and predictive accuracy tests in the context of parameter and model uncertainty under recursive and rolling estimation schemes. We begin by summarizing some recent theoretical findings, with particular emphasis on the construction of valid bootstrap...

In a recent paper, Hausman et al. (2012) propose a new estimator, HFUL (Heteroscedasticity robust Fuller), for the linear model with endogeneity. This estimator is consistent and asymptotically normally distributed in the many instruments and many weak instruments asymptotics. Moreover, this...

This paper shows how a weighted average of a forward and reverse Jackknife IV estimator (JIVE) yields estimators that are robust against heteroscedasticity and many instruments. These estimators, called HFUL (Heteroscedasticity robust Fuller) and HLIM (Heteroskedasticity robust limited...