This paper offers a framework for judging when the discrepancy embodied in current-account forecasts is large. The first step in implementing this framework involves developing an econometric model explaining the components of the aggregate discrepancy, estimating the associated parameters, and...

The FRB Multicountry Model (MCM) is a linked system of five quarterly national macroeconometric models of the United States, Canada, Germany, Japan, and the United Kingdom. The MCM emphasizes international linkages, and has equations for trade in goods and services, investment income flows, and...

Both future disturbances and estimated coefficients contribute to the uncertainty in model-based ex ante forecasts, but only the first source is usually taken into account when calculating confidence intervals for practical applications. Schmidt (1974) and Baillie (1979) provide an easily...

The rising current account deficit in the USA has attracted considerable attention in recent years. We use the "business cycle accounting" methodology to identify the principal distortions that have affected the external accounts of the US. In particular, we measure distortions in the optimality...

We study whether aggregation residuals in U.S. private investment in information technology (IT) exhibit a predictable pattern that is consistent with Hicks' composite-good theorem and that may be used for forecasting. To determine whether one can extract such a pattern, we apply the...

This paper uses the transcripts from the FOMC meetings to characterize the interactions between policymakers and macro models in the formulation of U.S. monetary policy. We develop a taxonomy of these interactions and present two case studies. The first case focuses on the debate on the choice...

In this paper we construct a new measure of U.S. prices relative to those of its trading partners and use it to reexamine the behavior of U.S. net exports. Our measure differs from existing measures of the dollar's real effective exchange rate (REER) in that it explicitly incorporates both the...

Though China's share of world trade is comparable to that of Japan, little is known about the response of China's trade to changes in exchange rates. The few estimates available suffer from two limitations. First, the data for trade prices are based on proxies for prices from other countries....

This paper evaluates the distributional properties of forecasts from six econometric models of the U.S. trade account. Using stochastic (Monte Carlo) simulation, we derive confidence intervals and forecast-based test statistics which account for uncertainty from future disturbances and from...