Understanding and forecasting aggregate and disaggregate price dynamics

The issue of forecast aggregation is to determine whether it is better to forecast a series directly or instead construct forecasts of its components and then sum these component forecasts. Notwithstanding some underlying theoretical results, it is generally accepted that forecast aggregation is an empirical issue. Empirical results in the literature often go unexplained. This leaves forecasters in the dark when confronted with the option of forecast aggregation. We take our empirical exercise a step further by considering the underlying issues in more detail. We analyse two price datasets, one for the United States and one for the Euro Area, which have distinctive dynamics and provide a guide to model choice. We also consider multiple levels of aggregation for each dataset. The models include an autoregressive model, a factor augmented autoregressive model, a large Bayesian VAR and a time-varying model with stochastic volatility. We find that once the appropriate model has been found, forecast aggregation can significantly improve forecast performance. These results are robust to the choice of data transformation. JEL Classification: E17, E31, C11, C38Aggregation, forecasting, inflation

Comparing alternative predictors based on large-panel factor models

This paper compares the predictive ability of the factor models of Stock and Watson (2002) and Forni, Hallin, Lippi, and Reichlin (2005) using a "large" panel of US macroeconomic variables. We propose a nesting procedure of comparison that clarifies and partially overturns the results of similar exercises in the literature. As in Stock and Watson (2002), we find that effciency improvements due to the weighting of the idiosyncratic components do not lead to significant more accurate forecasts. In contrast to Boivin and Ng (2005), we show that the dynamic restrictions imposed by the procedure of Forni, Hallin, Lippi, and Reichlin (2005) are not harmful for predictability. Our main conclusion is that for the dataset at hand the two methods have a similar performance and produce highly collinear forecasts. JEL Classification: C31, C52, C53Factor models, forecasting, Large Cross-Section

Are sectoral stock prices useful for predicting euro area GDP?

This paper evaluates how well sectoral stock prices forecast future economic activity compared to traditional predictors such as the term spread, dividend yield, exchange rates and money growth. The study is applied to euro area financial asset prices and real economic growth, covering the period 1973 to 2006. The paper finds that the term spread is the best predictor of future growth in the period leading up to the introduction of Monetary Union. After 1999, however, sectoral stock prices in general provide more accurate forecasts than traditional asset price measures across all forecast horizons. JEL Classification: C52, C53asset prices, forecasting models

Federal Reserve Information during the Great Moderation

Using data from the period 1970-1991, Romer and Romer (2000) showed that Federal Reserve forecasts of inflation and output were superior to those provided by commercial forecasters. In this paper, we show that this superior forecasting performance deterio- rated after 1991. Over the decade 1992-2001, the superior forecast accuracy of the Fed held only over a very short time horizon and was limited to its forecasts of inflation. In addition, the performance of both the Fed and the commercial forecasters in pre- dicting inflation and output, relative to that of “naive” benchmark models, dropped remarkably during this period.

Macroeconomic forecasting and structural change

The aim of this paper is to assess whether explicitly modeling structural change increases the accuracy of macroeconomic forecasts. We produce real time out-of-sample forecasts for inflation, the unemployment rate and the interest rate using a Time-Varying Coefficients VAR with Stochastic Volatility (TV-VAR) for the US. The model generates accurate predictions for the three variables. In particular for inflation the TV-VAR outperforms, in terms of mean square forecast error, all the competing models: fixed coefficients VARs, Time-Varying ARs and the na¨ıve random walk model. These results are also shown to hold over the most recent period in which it has been hard to forecast inflation. JEL Classification: C32, E37, E47forecasting, inflation, stochastic volatility, Time Varying Vector Autoregression

The Italian block of the ESCB multi-country model

This paper documents the structure, estimation and simulation properties of the Italian block of the ESCB-multi-country model (MCM). The model is used regularly as an input into Eurosystem projection exercises and, to a lesser extent, in simulation analysis. The specification of the Italian model follows closely that of the Area-Wide Model (AWM) and indeed the other MCM country blocks (in terms of specification and accounting framework). The MCM is a quarterly estimated structural macroeconomic model that treats the economy in a relatively closed manner. It has a long-run classical equilibrium with a vertical Phillips curve but with some short-run frictions in price/wage setting and factor demands. Consequently, activity is demand-determined in the short-run but supply-determined in the longer run with employment having converged to a level consistent with an exogenously given level of equilibrium unemployment. The precise properties of the model are illustrated using a number of standard variant simulations. JEL Classification: C3, C5, E1, E2Italy, Macro-econometric Modelling

Are Some Forecasters Really Better Than Others?

In any dataset with individual forecasts of economic variables, some forecasters will perform better than others. However, it is possible that these ex post differences reflect sampling variation and thus overstate the ex ante differences between forecasters. In this paper, we present a simple test of the null hypothesis that all forecasters in the US Survey of Professional Forecasters have equal ability. We construct a test statistic that reflects both the relative and absolute performance of the forecaster and use bootstrap techniques to compare the empirical results with the equivalents obtained under the null hypothesis of equal forecaster ability. Results suggests limited evidence for the idea that the best forecasters are actually innately better than others, though there is evidence that a relatively small group of forecasters perform very poorly.Forecasting, Bootstrap

Assessing the sensitivity of inflation to economic activity

A number of academic studies suggest that from the mid-1990s onwards there were changes in the link between inflation and economic activity. However, it remains unclear the extent to which this phenomenon can be ascribed to a change in the structural relationship between inflation and output, as opposed to a change in the size and nature of the shocks hitting the economy. This paper uses a suite of models, such as time-varying VAR techniques, traditional macro models, as well as DSGE models, to investigate, for various European countries as well as for the euro area, the evolution of the link between inflation and resource utilization and its dependence on the nature and size of the shocks. Our analysis suggests that the relationship between inflation and activity has indeed been changing over time, while remaining positive, with the correlation peaking during recessions. Quantitatively, the link between output and inflation is found to be highly dependent on which type of shocks hit the economy: while, in general, all demand shocks to output imply a reaction of inflation of the same sign, the latter will be less pronounced when output fluctuations are driven by supply shocks. In addition, a sharp deceleration of activity, as opposed to a subdued but protracted slowdown, results in a swifter decline in inflation. Inflation exhibits a rather strong persistence, with a negative impact still visible three years after the initial shock. JEL Classification: E31, E32, E37demand shock, inflation response, Macro model, output growth, Phillips curve

Management of acute diverticulitis with pericolic free gas (ADIFAS). an international multicenter observational study

Background: There are no specific recommendations regarding the optimal management of this group of patients. The World Society of Emergency Surgery suggested a nonoperative strategy with antibiotic therapy, but this was a weak recommendation. This study aims to identify the optimal management of patients with acute diverticulitis (AD) presenting with pericolic free air with or without pericolic fluid. Methods: A multicenter, prospective, international study of patients diagnosed with AD and pericolic-free air with or without pericolic free fluid at a computed tomography (CT) scan between May 2020 and June 2021 was included. Patients were excluded if they had intra-abdominal distant free air, an abscess, generalized peritonitis, or less than a 1-year follow-up. The primary outcome was the rate of failure of nonoperative management within the index admission. Secondary outcomes included the rate of failure of nonoperative management within the first year and risk factors for failure. Results: A total of 810 patients were recruited across 69 European and South American centers; 744 patients (92%) were treated nonoperatively, and 66 (8%) underwent immediate surgery. Baseline characteristics were similar between groups. Hinchey II-IV on diagnostic imaging was the only independent risk factor for surgical intervention during index admission (odds ratios: 12.5, 95% CI: 2.4-64, P =0.003). Among patients treated nonoperatively, at index admission, 697 (94%) patients were discharged without any complications, 35 (4.7%) required emergency surgery, and 12 (1.6%) percutaneous drainage. Free pericolic fluid on CT scan was associated with a higher risk of failure of nonoperative management (odds ratios: 4.9, 95% CI: 1.2-19.9, P =0.023), with 88% of success compared to 96% without free fluid ( P <0.001). The rate of treatment failure with nonoperative management during the first year of follow-up was 16.5%. Conclusion: Patients with AD presenting with pericolic free gas can be successfully managed nonoperatively in the vast majority of cases. Patients with both free pericolic gas and free pericolic fluid on a CT scan are at a higher risk of failing nonoperative management and require closer observation

Changing perspectives on the internationalization of R&D and innovation by multinational enterprises: a review of the literature

Internationalization of R&D and innovation by Multinational Enterprises (MNEs) has undergone a gradual and comprehensive change in perspective over the past 50 years. From sporadic works in the late 1950s and in the 1960s, it became a systematically analysed topic in the 1970s, starting with pioneering reports and “foundation texts”. Our review unfolds the theoretical and empirical evolution of the literature from dyadic interpretations of centralization versus decentralization of R&D by MNEs to more comprehensive frameworks, wherein established MNEs from Advanced Economies still play a pivotal role, but new players and places also emerge in the global generation and diffusion of knowledge. Hence views of R&D internationalization increasingly rely on concepts, ideas and methods from IB and other related disciplines such as industrial organization, international economics and economic geography. Two main findings are highlighted. First, scholarly research pays an increasing attention to the network-like characteristics of international R&D activities. Second, different streams of literature have emphasized the role of location- specific factors in R&D internationalization. The increasing emphasis on these aspects has created new research opportunities in some key areas, including inter alia: cross-border knowledge sourcing strategies, changes in the geography of R&D and innovation, and the international fragmentation of production and R&D activities