Does money matter in inflation forecasting

This paper provides the most fully comprehensive evidence to date on whether or not monetary aggregates are valuable for forecasting US inflation in the early to mid 2000s. We explore a wide range of different definitions of money, including different methods of aggregation and different collections of included monetary assets. In our forecasting experiment we use two non-linear techniques, namely, recurrent neural networks and kernel recursive least squares regression - techniques that are new to macroeconomics. Recurrent neural networks operate with potentially unbounded input memory, while the kernel regression technique is a finite memory predictor. The two methodologies compete to find the best fitting US inflation forecasting models and are then compared to forecasts from a naive random walk model. The best models were non-linear autoregressive models based on kernel methods. Our findings do not provide much support for the usefulness of monetary aggregates in forecasting inflation.

Replications of forecasting research

We have examined the frequency of replications published in the two leading forecasting journals, the International Journal of Forecasting (IJF) and the Journal of Forecasting (JoF). Replications in the IJF and JoF between 1996 and 2008 comprised 8.4% of the empirical papers. Various other areas of management science have values ranging from 2.2% in the Journal of Marketing Research to 18.1% in the American Economic Review. We also found that 35.3% of the replications in forecasting journals provided full support for the findings of the initial study, 45.1% provided partial support, and 19.6% provided no support. Given the importance of replications, we recommend various steps to encourage replications, such as requiring a full disclosure of the methods and data used for all published papers, and inviting researchers to replicate specific important papers.

Reduced dimension models for weather forecasting

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Forecasting the UK/US exchange rate with divisia monetary models and neural networks

This paper compares the UK/US exchange rate forecasting performance of linear and nonlinear models based on monetary fundamentals, to a random walk (RW) model. Structural breaks are identified and taken into account. The exchange rate forecasting framework is also used for assessing the relative merits of the official Simple Sum and the weighted Divisia measures of money. Overall, there are four main findings. First, the majority of the models with fundamentals are able to beat the RW model in forecasting the UK/US exchange rate. Second, the most accurate forecasts of the UK/US exchange rate are obtained with a nonlinear model. Third, taking into account structural breaks reveals that the Divisia aggregate performs better than its Simple Sum counterpart. Finally, Divisia-based models provide more accurate forecasts than Simple Sum-based models provided they are constructed within a nonlinear framework.

Statistical models for rainfall:characterisation and forecasting

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Development of two forecasting systems and the design of hard copy information displays

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Forecasting the term structure when short-term rates are near zero

This paper compares the experience of forecasting the UK government bond yield curve before and after the dramatic lowering of short-term interest rates from October 2008. Out-of-sample forecasts for 1, 6 and 12 months are generated from each of a dynamic Nelson-Siegel model, autoregressive models for both yields and the principal components extracted from those yields, a slope regression and a random walk model. At short forecasting horizons, there is little difference in the performance of the models both prior to and after 2008. However, for medium- to longer-term horizons, the slope regression provided the best forecasts prior to 2008, while the recent experience of near-zero short interest rates coincides with a period of forecasting superiority for the autoregressive and dynamic Nelson-Siegel models. © 2014 John Wiley & Sons, Ltd.

Mainstream media behavior analysis on Twitter:a case study on UK general election

With the development of social media tools such as Facebook and Twitter, mainstream media organizations including newspapers and TV media have played an active role in engaging with their audience and strengthening their influence on the recently emerged platforms. In this paper, we analyze the behavior of mainstream media on Twitter and study how they exert their influence to shape public opinion during the UK's 2010 General Election. We first propose an empirical measure to quantify mainstream media bias based on sentiment analysis and show that it correlates better with the actual political bias in the UK media than the pure quantitative measures based on media coverage of various political parties. We then compare the information diffusion patterns from different categories of sources. We found that while mainstream media is good at seeding prominent information cascades, its role in shaping public opinion is being challenged by journalists since tweets from them are more likely to be retweeted and they spread faster and have longer lifespan compared to tweets from mainstream media. Moreover, the political bias of the journalists is a good indicator of the actual election results. Copyright 2013 ACM.

Short-term wind power forecasting using Gaussian processes

Since wind has an intrinsically complex and stochastic nature, accurate wind power forecasts are necessary for the safety and economics of wind energy utilization. In this paper, we investigate a combination of numeric and probabilistic models: one-day-ahead wind power forecasts were made with Gaussian Processes (GPs) applied to the outputs of a Numerical Weather Prediction (NWP) model. Firstly the wind speed data from NWP was corrected by a GP. Then, as there is always a defined limit on power generated in a wind turbine due the turbine controlling strategy, a Censored GP was used to model the relationship between the corrected wind speed and power output. To validate the proposed approach, two real world datasets were used for model construction and testing. The simulation results were compared with the persistence method and Artificial Neural Networks (ANNs); the proposed model achieves about 11% improvement in forecasting accuracy (Mean Absolute Error) compared to the ANN model on one dataset, and nearly 5% improvement on another.

Estimation of computer waste quantities using forecasting techniques

Technology changes rapidly over years providing continuously more options for computer alternatives and making life easier for economic, intra-relation or any other transactions. However, the introduction of new technology “pushes” old Information and Communication Technology (ICT) products to non-use. E-waste is defined as the quantities of ICT products which are not in use and is bivariate function of the sold quantities, and the probability that specific computers quantity will be regarded as obsolete. In this paper, an e-waste generation model is presented, which is applied to the following regions: Western and Eastern Europe, Asia/Pacific, Japan/Australia/New Zealand, North and South America. Furthermore, cumulative computer sales were retrieved for selected countries of the regions so as to compute obsolete computer quantities. In order to provide robust results for the forecasted quantities, a selection of forecasting models, namely (i) Bass, (ii) Gompertz, (iii) Logistic, (iv) Trend model, (v) Level model, (vi) AutoRegressive Moving Average (ARMA), and (vii) Exponential Smoothing were applied, depicting for each country that model which would provide better results in terms of minimum error indices (Mean Absolute Error and Mean Square Error) for the in-sample estimation. As new technology does not diffuse in all the regions of the world with the same speed due to different socio-economic factors, the lifespan distribution, which provides the probability of a certain quantity of computers to be considered as obsolete, is not adequately modeled in the literature. The time horizon for the forecasted quantities is 2014-2030, while the results show a very sharp increase in the USA and United Kingdom, due to the fact of decreasing computer lifespan and increasing sales.

Weather forecasting to predict practical dynamic asset rating of overhead lines

This paper describes the potential of pre-setting 11kV overhead line ratings over a time period of sufficient length to be useful to the real-time management of overhead lines. This forecast is based on short and long term freely available weather forecasts and is used to help investigate the potential for realising dynamic rating benefits on the electricity network. A comparison between the realisable benefits in ratings using this forecast data, over the period of a year has been undertaken.

Inflation forecasting, relative price variability and skewness

This article presents out-of-sample inflation forecasting results based on relative price variability and skewness. It is demonstrated that forecasts on long horizons of 1.5-2 years are significantly improved if the forecast equation is augmented with skewness. © 2010 Taylor & Francis.