We analyze comovements in four measures of budget surpluses for 18 OECD countries for 1980–2008 with a dynamic latent factor model. The world factor in national budget surpluses declines substantially in the 1980s, rises throughout much of the 1990s to a peak in 2000, before declining again in...

We model the U.S. business cycle using a dynamic factor model that identifies common factors underlying fluctuations in state-level income and employment growth. We find three such common factors, each of which is associated with a set of factor loadings that indicate the extent to which each...

In this paper, we use recent developments in the testing of long-run neutrality propositions to measure the long-run response of real stock prices to a permanent inflation shock for 16 individual industrialized countries. The estimation results provide considerable support for long-run inflation...

The authors use a dynamic latent factor model to analyze comovements in OECD surpluses. The world factor underlying common fluctuations in budget surpluses across countries explains an average of 28 to 44 percent of the variation in individual country surpluses. The world factor, which can be...

In this article we examine the structural stability of predictive regression models of U.S. quarterly aggregate real stock returns over the postwar era. We consider predictive regressions models of Samp;P 500 and CRSP equal-weighted real stock returns based on eight financial variables that...

Welch and Goyal (2008) find that numerous economic variables with in-sample predictive ability for the equity premium fail to deliver consistent out-of-sample forecasting gains relative to the historical average. Arguing that model uncertainty and instability seriously impair the forecasting...