This paper proposes a framework to implement regression-based tests of predictive ability in unstable environments, including, in particular, forecast unbiasedness and efficiency tests, commonly referred to as tests of forecast rationality. Our framework is general: it can be applied to...

The main goal of this article is to provide an answer to the question: “Does anything forecast exchange rates, and if so, which variables?” It is well known that exchange rate fluctuations are very difficult to predict using economic models, and that a random walk forecasts exchange rates...

We explore the linkage between equity and commodity markets, focusing in particular on its evolution over time. We document that a country's equity market value has significant out-of-sample predictive ability for the future global commodity price index for several primary commodity-exporting...

We show the existence of a very short-term relationship at the daily frequency between changes in the price of a country's major commodity export price and changes in its nominal exchange rate. The relationship appears to be robust and to hold when we use contemporaneous (realized) commodity...

We show the existence of a very short-term relationship at the daily frequency between changes in the price of a country's major commodity export price and changes in its nominal exchange rate. The relationship appears to be robust and to hold when we use contemporaneous (realized) commodity...

While forecasting is a common practice in academia, government and business alike, practitioners are often left wondering how to choose the sample for estimating forecasting models. When we forecast inflation in 2014, for example, should we use the last 30 years of data or the last 10 years of...

We propose new indices to measure macroeconomic uncertainty. The indices measure how unexpected a realization of a representative macroeconomic variable is relative to the unconditional forecast error distribution. We use forecast error distributions based on the nowcasts and forecasts of the...

This review provides an overview of forecasting methods that can help researchers forecast in the presence of non-stationarities caused by instabilities. The emphasis of the review is both theoretical and applied, and provides several examples of interest to economists. We show that modeling...

This paper studies the dynamic relationship between exchange rate fluctuations and world commodity price movements. Taking into account parameter instability, we demonstrate surprisingly robust evidence that exchange rates predict world commodity price movements, both in-sample and...

This paper demonstrates that "commodity currency" exchange rates have remarkably robust power in predicting future global commodity prices, both in sample and out-of-sample. A critical element of our in-sample approach is to allow for structural breaks, endemic to empirical exchange rate models,...