are initial releases good nowcasts?

Data revisions to national accounts pose a serious challenge to policy decision making. Well-behaved revisions should be unbiased, small and unpredictable. This paper shows that revisions to German national accounts are biased, large and predictable. Moreover, using filtering techniques designed to process data subject to revisions, the real-time forecasting performance of initial releases can be increased by up to 17%. For total real GDP growth, however, the initial release is an optimal forecast. Yet, given the results for disaggregated variables, the averaging-out of biases and inefficiencies at the aggregate GDP level appears to be good luck rather than good forecasting

Mean-Variance Cointegration and the Expectations Hypothesis

The present work provides an economic explanation of a well-known (seeming) violation of the expectations hypothesis of the term structure (EHT) - the frequent finding of unit roots in interest rate spreads. We derive from EHT that the nonstationarity stems from the holding premium, which is hence cointegrated with the spread. We model the premium as being proportional to the integrated variance of excess returns and further propose a cointegration test. Simulating the distribution of the test statistic we actually find cointegration relations between premia and spreads in US data. The EHT appears to perform better than previously thought.Expectations Hypothesis; Holding Premium; Persistence; Cointegration; GARCH

Mean-Variance Cointegration and the Expectations Hypothesis

The present paper sheds further light on a well-known (alleged) violation of the expec- tations hypothesis of the term structure (EHT) - the frequent finding of unit roots in interest rate spreads. We show that the EHT implies (i) that the nonstationarity stems from the holding premium, which is hence (ii) cointegrated with the spread. In a stochas- tic discount factor framework we model the premium as being driven by the integrated variance of excess returns. Introducing the concept of mean-variance cointegration we actually find cointegration relations between spreads and premia in US data.Expectations Hypothesis, Holding Premium, Persistence, Cointegration, GARCH

Testing the Preferred-Habitat Theory

Testing the Preferred-Habitat Theory: The Role ofTime-Varying Risk Aversion Abstract: This paper examines the preferred-habitat theory under time-varying risk aversion. The predicted positive relation between the term spread and relative supply of longer-term debt is stronger when risk aversion is high. To capture this effect, a time-varying coefficient model is introduced and applied to German bond data. The results support the theoretical predictions and indicate substantial time variation: under high risk aversion, yield spreads react about three times more strongly than when risk aversion is low. The accumulated response of term spreads to a one standard deviation change in debt supply ranges between 5 and 33 basis points

Are US InflationExpectations Re-Anchored?

Anchored inflation expectations are of key importance for monetary policy. If long-terminflation expectations arewell-anchored, they should be unaffected by short-termeconomic news. This letter introduces newsregressions with multiple endogenous breaks to investigate the de- and re-anchoring of US inflation expectations. We confirm earlier evidence on the de-anchoring of expectations driven by the outbreak of the crisis. Our results indicate that expectations have not been re-anchored ever since

When can non-quarantine border control be sustainable?

Closing borders and quarantining arrivals stops new COVID cases from coming into a country, but is economically and personally costly. Enzo Weber (University of Regensburg), Till Strohsal (Freie Universität Berlin), Zhen Zhu (Wrightway Aviation Technologies) and Duaa Serhan (State University of New York at Binghamton) suggest alternative border control strategies

Sustainable Border Control Policy in the COVID-19 Pandemic: A Math Modeling Study

Imported COVID-19 cases, if unchecked, can jeopardize the effort of domestic containment. We aim to find out what sustainable border control options for different entities (e.g., countries, states) exist during the reopening phases, given their own choice of domestic control measures and new technologies such as contact tracing. We propose a SUIHR model, which represents an extension to the discrete time SIR models. The model focuses on studying the spreading of virus predominantly by asymptomatic and pre-symptomatic patients. Imported risk and (1-tier) contact tracing are both built into the model. Under plausible parameter assumptions, we seek sustainable border control policies, in combination with sufficient internal measures, which allow entities to confine the virus without the need to revert back to more restrictive life styles or to rely on herd immunity. When the base reproduction number of COVID-19 exceeds 2.5, even 100% effective contact tracing alone is not enough to contain the spreading. For an entity that has completely eliminated the virus domestically, and resumes "normal", very strict pre-departure screening and test and isolation upon arrival combined with effective contact tracing can only delay another outbreak by 6 months. However, if the total net imported cases are non-increasing, and the entity employs a confining domestic control policy, then the total new cases can be contained even without border control.Comment: 10 pages, 3 figures and 1 table. A condensed and modified version. Improved writing, no major results change

Assessing the Anchoring of Inflation Expectations

This paper proposes an ESTAR modeling framework to analyze the anchoring of inflation expectations. Anchoring criteria are empirical estimates of a market implied inflation target as well as the strength of the anchor that holds expectations at the target. Results from daily financial market expectations in the United States, European Monetary Union, United Kingdom and Sweden indicate: First, shorter-term expectations are better anchored than longer-term expectations. Second, expectations are best anchored in the EU, followed by US, Sweden and UK. Third, during the crisis market implied targets mostly decline while the strength of the anchor remains mostly unaffected