Properties of macroeconomic forecast errors

This paper investigates the distributional properties of individual and consensus time series macroeconomic forecast errors, using data from the Survey of Professional Forecasters. The degree of autocorrelation and the presence of ARCH in the consensus errors is also determined. We find strong evidence of leptokurtic forecast errors and some evidence of skewness, suggesting that an assumption of error normality is inappropriate; many of the forecast error series are found to have non-zero mean, and we find sporadic evidence of consensus error ARCH. Properties of the distribution of cross-sectional forecast errors are also examined

Sample size, lag order and critical values of seasonal unit root tests

This paper presents a response surface analysis for the distributions of the popular tests for seasonal unit roots in quarterly observed time series variables developed by Hylleberg et al. (1990). Approximate asymptotic distributions are obtained, and response surface coefficients for 1%-, 5%- and 10%-level critical values are reported, permitting simple computation of accurate critical values for any sample size and lag order. Five test statistics are considered, along with five different specifications of the deterministic component in the test regression; allowance is also made for the lag order to be determined endogenously, using commonly applied selection methods. Dependence of the critical values and the probability density functions on the sample size and lag order is also investigated

Seasonal unit root tests with seasonal mean shifts

This paper analyses additive outlier and innovational outlier tests for seasonal unit roots when seasonal mean shifts occur under the null hypothesis. When the magnitude of the breaks is large, simulation evidence reveals that, for three of the four testing procedures considered, the endogenously determined break point can be incorrectly estimated, resulting in spurious rejections of the null. A simple modification to one of the testing approaches is proposed which achieves a substantial improvement in test size

Tests for stationarity in series with endogenously determined structural change

We consider tests of null hypothesis of stationarity against a unit root alternative when the series is subject to structural change at an unknown point in time. Three extant test are reviewed which allow for an endogenously determined instantaneous structural break, and a related fourth procedure is introduced. We further propose tests which permit the structural change to be gradual rather than instantaneous, allowing the null hypothesis to be a stationarity about a smooth transition in linear trend. The size and power properties of the tests are investigated, and the test are applied to four economic time series

A Note on Busetti-Harvey tests for stationarity in series with structural breaks

In this note we highlight a minor error in asymptotic distribution of one of the Busetti and Harvey (2001) tests for stationarity in the presence of structural breaks, and provide corrected asymptotic critical values where relevant. In addition, we examine the extent to which finite sample critical values for the Busetti-Harvey tests are approximated by their asymptotic counterparts when the location of the break is determined endogenously

Corrigendum to “Common features in UK sectoral output” [Economic Modelling 19 (2002) 91–104]

Corrigendum to “Common features in UK sectoral output” [Economic Modelling 19 (2002) 91–104

The prebisch-singer hypothesis: four centuries of evidence

We employ a unique data set and new time-series techniques to reexamine the existence of trends in relative primary commodity prices. The data set comprises 25 commodities and provides a new historical perspective, spanning the seventeenth to the twenty-first centuries. New tests for the trend function, robust to the order of integration of the series, are applied to the data. Results show that eleven price series present a significant and downward trend over all or some fraction of the sample period. In the very long run, a secular, deteriorating trend is a relevant phenomenon for a significant proportion of primary commodities. © 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Bonferroni Type Tests for Return Predictability and the Initial Condition^*

We develop tests for predictability that are robust to both the magnitude of the initial condition and the degree of persistence of the predictor. While the popular Bonferroni Q test of Campbell and Yogo (2006) displays excellent power properties for strongly persistent predictors with an asymptotically negligible initial condition, it can suffer from severe size distortions and power losses when either the initial condition is asymptotically non-negligible or the predictor is weakly persistent. The Bonferroni t test of Cavanagh et al. (1995), although displaying power well below that of the Bonferroni Q test for strongly persistent predictors with an asymptotically negligible initial condition, displays superior size control and power when the initial condition is asymptotically non-negligible. In the case where the predictor is weakly persistent, a conventional regression t test comparing to standard normal quantiles is known to be asymptotically optimal under Gaussianity. Based on these properties, we propose two asymptotically size controlled hybrid tests that are functions of the Bonferroni Q, Bonferroni t, and conventional t tests. Our proposed hybrid tests exhibit very good power regardless of the magnitude of the initial condition or the persistence degree of the predictor. An empirical application to the data originally analysed by Campbell and Yogo (2006) shows our new hybrid tests are much more likely to find evidence of predictability than the Bonferroni Q test when the initial condition of the predictor is estimated to be large in magnitude.</p