41 research outputs found
What causes the forecasting failure of Markov-switching models ? A Monte Carlo study.
This paper explores the forecasting abilities of Markov-Switching models. Although MS models generally display a superior in-sample ïŹt relative to linear models, the gain in prediction remains small. We conïŹrm this result using simulated data for a wide range of speciïŹcations. In order to explain this poor performance, we use a forecasting error decomposition. We identify four components and derive their analytical expressions in diïŹerent MS speciïŹcations. The relative contribution of each source is assessed through Monte Carlo simulations. We ïŹnd that the main source of error is due to the misclassiïŹcation of future regimes.Markov Switching; Regime Shifts; Forecasting;
What causes the forecasting failure of Markov-Switching models? A Monte Carlo study
This paper explores the forecasting abilities of Markov-Switching models. Although MS models generally display a superior in-sample fit relative to linear models, the gain in prediction remains small. We confirm this result using simulated data for a wide range of specifications by applying several tests of forecast accuracy and encompassing robust to nested models. In order to explain this poor performance, we use a forecasting error decomposition. We identify four components and derive their analytical expressions in different MS specifications. The relative contribution of each source is assessed through Monte Carlo simulations. We find that the main source of error is due to the misclassification of future regimes.Forecasting, Regime Shifts, Markov-Switching.
Revisiting the transitional dynamics of business-cycle phases with mixed frequency data
This paper introduces a Markov-switching model in which transition probabilities depend on higher frequency indicators and their lags through polynomial weight-ing schemes. The MSV-MIDAS model is estimated via maximum likelihood (ML) methods. The estimation relies on a slightly modified version of Hamilton's recursive filter. We use Monte Carlo simulations to assess the robustness of the estimation procedure and related test statistics. The results show that ML provides accurate estimates, but they suggest some caution in interpreting the tests of the parameters involved in the transition probabilities. We apply this new model to the detection and forecasting of business cycle turning points in the United States. We properly detect recessions by exploiting the link between GDP growth and higher frequency variables from financial and energy markets. The spread term is a particularly useful indicator to predict recessions in the United States. The empirical evidence also supports the use of functional polynomial weights in the MIDAS specification of the transition probabilities
Les Ă©conomistes sont-ils chartistes ou fondamentalistes ? Une enquĂȘte auprĂšs de 80 chercheurs français.
Les enquĂȘtes auprĂšs des cambistes sur leurs anticipations de change se sont multipliĂ©es depuis une dizaine dâannĂ©es. En revanche, il nâexiste pas dâĂ©tude sur la vision universitaire du fonctionnement du marchĂ© des changes. Cet article vise Ă combler cette lacune. Nous avons rĂ©alisĂ© en novembre 2002 un sondage au sein de plusieurs universitĂ©s françaises. 80 chercheurs ont rĂ©pondu Ă nos questions. Ils indiquent ne pas croire en une influence des variables fondamentales Ă court terme. En particulier, ils rejettent lâintĂ©rĂȘt pratique de la PPA pour prĂ©dire les mouvements des cours. En revanche, les modĂšles de fondamentaux retrouveraient leur utilitĂ© Ă moyen et surtout Ă long terme. La confrontation de ces rĂ©sultats Ă ceux dâune enquĂȘte rĂ©alisĂ©e sur le marchĂ© des changes amĂ©ricain dĂ©montre que ce point de vue est relativement peu Ă©loignĂ© de celui des professionnels du marchĂ©.Surveys of market participants are now widely used in the exchange-rate literature. However, there is no study of academicsâviews on exchange-rate dynamics. Our paper aims to fill this gap. We conducted a survey of 80 economists in several French universities in November 2002. Most respondents do not perceive economic fundamentals as important determinants of exchange rates at short and medium horizons. In particular, PPP is not regarded as a useful concept for predicting exchange-rate movements. The consistency between these beliefs and those of foreign-exchange traders disproves conventional wisdom, which sees a wide gap between the academic view and market tradersâ everyday practices.Finance internationale; taux de change;
DĂ©mographie et fluctuations Ă©conomiques
Cet article montre qu'un modÚle néo-classique, aux hypothÚses habituelles mais pourvu d'une structure par ùge de la population explicite, converge vers son sentier de croissance équilibré avec des oscillations amorties. Il reproduit ainsi un processus de retour à la moyenne avec fluctuations de court terme que l'on observe dans les séries de produit intérieur brut de la plupart des pays de l'OCDE.
Mean-reversion vs. adjustment to PPP: the two regimes of exchange rate dynamics under the EMS, 1979-1998
Short-term forecasts of French GDP: A dynamic factor model with targeted predictors
International audienceIn recent years, factor models have received increasing attention from both econometricians and practitioners in the forecasting of macroeconomic variables. In this context, Bai and Ng (2008) find an improvement in selecting indicators according to the forecast variable prior to factor estimation (targeted predictors). In particular, they propose using the LARS-EN algorithm to remove irrelevant predictors. In this paper, we adapt the Bai and Ng procedure to a setup in which data releases are delayed and staggered. In the pre-selection step, we replace actual data with estimates obtained on the basis of past information, where the structure of the available information replicates the one a forecaster would face in real time. We estimate on the reduced dataset the dynamic factor model of Giannone, Reichlin and Small (2008) and Doz, Giannone and Reichlin (2011), which is particularly suitable for the very short-term forecast of GDP. A pseudo real-time evaluation on French data shows the potential of our approach
Revisiting the transitional dynamics of business-cycle phases with mixed-frequency data
This paper introduces a Markov-switching model in which transition probabilities depend on higher frequency indicators and their lags through polynomial weighting schemes. The MSV-MIDAS model is estimated through maximum likelihood (ML) methods with a slightly modified version of Hamiltonâs filter. Monte Carlo simulations show that ML provides accurate estimates, but they suggest some caution in interpreting the tests of the parameters in the transition probabilities. We apply this new model to forecast business cycle turning points in the United States. We properly detect recessions by exploiting the link between GDP growth and higher frequency variables from financial and energy markets
Ătalonnages du taux de croissance du PIB français sur la base des enquĂȘtes de conjoncture
This paper discusses new bridge models for short-term forecasting of French quarterly GDP growth. The only data used are from business surveys in French manufacturing, services, and construction. We consider two alternative methods. The first relies on the general-to-specific (GETS) algorithm applied to blocks of randomly selected variables (Hendry and Krolzig, 2005) ; the other relies on the combination method popularized by Stock and Watson (2004). We conduct in-sample and out-of-sample assessments of both methods using recursive and rolling regressions. We show that the forecast based on an automatic regression-model selection (GETS) performs better, and that extending the database to business surveys in the service and construction sectors can be useful for short-term GDP forecasting.Cet article dĂ©veloppe des nouveaux Ă©talonnages du taux de croissance du PIB français destinĂ©s Ă produire des prĂ©visions de court terme de lâactivitĂ© . Ils sont construits Ă partir de donnĂ©es dâenquĂȘte de lâInsee, dans lâindustrie mais Ă©galement dans les services et le bĂątiment. Nous examinons deux stratĂ©gies de rĂ©duction de l information, lâune fondĂ©e sur lâalgorithme de sĂ©lection automatique GETS par blocs de Hendry et Krolzig (2005), lâautre sur la mĂ©thode de combinaison popularisĂ©e par Stock et Watson (2004). Ces deux mĂ©thodes sont Ă©valuĂ©es en-Ă©chantillon et hors-Ă©chantillon au travers de rĂ©gressions rĂ©cursives et roulantes. Nous montrons la supĂ©rioritĂ© des Ă©talonnages construits avec GETS et lâintĂ©rĂȘt de considĂ©rer dâautres enquĂȘtes que celle dans lâindustrie dans les stratĂ©gies de modĂ©lisation et de prĂ©vision.Bessec Marie. Ătalonnages du taux de croissance du PIB français sur la base des enquĂȘtes de conjoncture. In: Ăconomie & prĂ©vision, n°193, 2010-2. pp. 77-99
Les Ă©conomistes sont-ils chartistes ou fondamentalistes ? Une enquĂȘte auprĂšs de quatre-vingt chercheurs français
Surveys of market participants are now widely used in the exchange-rate literature. However, there is no study of academicsâ views on exchange-rate dynamics. Our paper aims to fill this gap. We conducted a survey of 80 economists in several French universities in November 2002. Most respondents do not perceive economic fundamentals as important determinants of exchange rates at short and medium horizons. In particular, PPP is not regarded as a useful concept for predicting exchange-rate movements. The consistency between these beliefs and those of foreign-exchange traders disproves conventional wisdom, which sees a wide gap between the academic view and market tradersâ everyday practices.Les enquĂȘtes auprĂšs des cambistes se sont multipliĂ©es depuis une dizaine dâannĂ©es. En revanche, il nâexiste pas dâĂ©tude sur la vision universitaire du fonctionnement du marchĂ© des changes. Cet article vise Ă combler cette lacune. Nous avons rĂ©alisĂ© en novembre 2002 un sondage au sein de plusieurs universitĂ©s françaises. Les rĂ©pondants indiquent ne pas croire en une influence des variables fondamentales Ă court terme. En particulier , ils rejettent lâintĂ©rĂȘt pratique de la PPA (ParitĂ© de Pouvoir dâAchat) en courte pĂ©riode. En revanche, les modĂšles de fondamentaux retrouveraient leur utilitĂ© Ă moyen et long terme. La confrontation de ces rĂ©sultats Ă ceux obtenus sur le marchĂ© des changes amĂ©ricain dĂ©montre que ce point de vue est peu Ă©loignĂ© de celui des professionnels du marchĂ©.Bessec Marie. Les Ă©conomistes sont-ils chartistes ou fondamentalistes ? Une enquĂȘte auprĂšs de quatre-vingt chercheurs français. In: Ăconomie & prĂ©vision, n°169-171, 2005-3-5. pp. 239-249