On the predictive power of the term structure of interest rates for future inflation changes in the presence of political instability: the Turkish economy

This study investigates whether the term structure contains useful information about future inflation for Turkey during 1990–2000, a period of high inflation, high budget deficits, and political instability. Constant parameter and time varying parameter models are rejected by the data. The relationship between term structure of interest rates and inflation changes is found to be explained by a time-varying-parameter model with Markov-switching heteroskedastic disturbances. Thus, the term structure of interest rates is limited as a guide for monetary policy in an economy subject to regime changes such as that of Turkey. Stability can be achieved only by reducing inflation through circumscribing substantial government budget deficits and the political instability underlying them.     

Regional asymmetries in monetary transmission: The case of South Africa

PPP is unlikely to hold instantaneously for all commodities across the different regions of a monetary area. It is therefore possible that monetary expansions or contractions will have different effects in different regions, if there are regional asymmetries in the monetary transmission mechanism. We estimate the size of such asymmetries across the nine provinces of South Africa over the period 1997–2005. There are large and statistically significant differences in the response of prices to monetary expansions and contractions. The problems arising from transmission mechanism asymmetries are not restricted to international monetary unions.     

当前应对我国通货膨胀的思考

当前国内外环境仍然极为复杂,物价上涨比较快、通胀预期增强。造成这轮通货膨胀的主要原因,在于应对金融危机而采取强力的救市政策、流动性过剩、CPI体系、大宗商品价格等方面。抗通胀不能一味地紧缩货币,搞不好会打压经济增长,很可能出现＂通胀没有管住,经济却出现下滑＂的滞胀危险。治理当前通货膨胀的思路,应结合当前国家宏观政策,从控制信贷、人民币升值、融资、税收、改善收入分配等方面着手。     

Forecast Combination and Model Averaging Using Predictive Measures

We extend the standard approach to Bayesian forecast combination by forming the weights for the model averaged forecast from the predictive likelihood rather than the standard marginal likelihood. The use of predictive measures of fit offers greater protection against in-sample overfitting when uninformative priors on the model parameters are used and improves forecast performance. For the predictive likelihood we argue that the forecast weights have good large and small sample properties. This is confirmed in a simulation study and in an application to forecasts of the Swedish inflation rate, where forecast combination using the predictive likelihood outperforms standard Bayesian model averaging using the marginal likelihood.     

Household Saving in the United States: Measurement and Behavior

Official measures of U.S. personal saving incorporate conceptual errors relating to the measurement of both income and consumption. This article identifies the errors, computes an adjusted personal saving rate to correct the errors, and estimates equations explaining personal saving. The estimates support the adjustments, and the adjusted series has more pronounced movements than the official series, the movements being largely related to changes in income and wealth.     

论外汇推动型通货膨胀及其治理——兼评输入型通货膨胀假说

 对我国当前通货膨胀如何定性,是正确制定和实施宏观调控政策的重要前提。本文针对目前的一种主流观点,即将我国当前的通货膨胀定性为“输入型”的观点,提出了相左的看法。在此基础上,通过建立经济模型,并借助统计资料,从理论上论证了我国当前通货膨胀属于“外汇推动型”。以这一认识为前提,指出为了避免通货膨胀的“硬着陆”,防止在治理通货膨胀过程中导致国内经济受到伤害,有必要重新调整宏观调控措施。为此针对外汇推动型通货膨胀的特点,提出了若干“软着陆”的宏观调控措施的建议。     

Forecast Uncertainty—Ex Ante and Ex Post: U.S. Inflation and Output Growth

Survey respondents who make point predictions and histogram forecasts of macro-variables reveal both how uncertain they believe the future to be, ex ante, as well as their ex post performance. Macroeconomic forecasters tend to be overconfident at horizons of a year or more, but overestimate (i.e., are underconfident regarding) the uncertainty surrounding their predictions at short horizons. Ex ante uncertainty remains at a high level compared to the ex post measure as the forecast horizon shortens. There is little evidence of a link between individuals’ ex post forecast accuracy and their ex ante subjective assessments.     

Forecasting Macroeconomic Variables Under Model Instability

We compare different approaches to accounting for parameter instability in the context of macroeconomic forecasting models that assume either small, frequent changes versus models whose parameters exhibit large, rare changes. An empirical out-of-sample forecasting exercise for U.S. gross domestic product (GDP) growth and inflation suggests that models that allow for parameter instability generate more accurate density forecasts than constant-parameter models although they fail to produce better point forecasts. Model combinations deliver similar gains in predictive performance although they fail to improve on the predictive accuracy of the single best model, which is a specification that allows for time-varying parameters and stochastic volatility. Supplementary materials for this article are available online.     

Bond Risk Premia Forecasting: A Simple Approach for Extracting Macroeconomic Information from a Panel of Indicators

We propose a simple but effective estimation procedure to extract the level and the volatility dynamics of a latent macroeconomic factor from a panel of observable indicators. Our approach is based on a multivariate conditionally heteroskedastic exact factor model that can take into account the heteroskedasticity feature shown by most macroeconomic variables and relies on an iterated Kalman filter procedure. In simulations we show the unbiasedness of the proposed estimator and its superiority to different approaches introduced in the literature. Simulation results are confirmed in applications to real inflation data with the goal of forecasting long-term bond risk premia. Moreover, we find that the extracted level and conditional variance of the latent factor for inflation are strongly related to NBER business cycles.     

Does inflation bias stabilize real growth? Evidence from Pakistan

The motive of a typical discretionary central banker to accommodate excess inflation (inflation bias) is either to stabilize real growth or to spur it beyond natural rate. To what extent inflation bias helps to materialize this intention warrants empirical investigation. A more direct empirical probe into this issue, however, requires observable inflation bias indicators, which we model through desirable and threshold inflation rates as well as their respective society’s preferences. While examining the effects of inflation bias for a typical case of the discretionary monetary policy strategy of Pakistan, we found that contrary to the desired boost/stabilization in real growth, the policy (via. inflation bias) produced counterproductive results. Inflation bias was not merely ineffective in inducing real growth but significantly destabilized it. Moreover, the results, which are robust to different inflation bias indicators and subsample analysis, indicate that the higher the inflation bias, the higher is the intensity (magnitude) of its destabilizing effect and vice versa. This suggests that a policy that would minimize/constrain inflation bias would be a better choice as it would not only help achieve low and stable inflation but also a sustainable real economic growth.