Forecasting with Bayesian multivariate vintage-based VARs

We consider the forecasting of macroeconomic variables that are subject to revisions, using Bayesian vintage-based vector autoregressions. The prior incorporates the belief that, after the first few data releases, subsequent ones are likely to consist of revisions that are largely unpredictable. The Bayesian approach allows the joint modelling of the data revisions of more than one variable, while keeping the concomitant increase in parameter estimation uncertainty manageable. Our model provides markedly more accurate forecasts of post-revision values of inflation than do other models in the literature.

Do real balance effects invalidate the Taylor principle in closed and open economies?

This paper examines the determinacy implications of forecast-based monetary policy rules that set the interest rate in response to expected future inflation in a Neo-Wicksellian model that incorporates real balance effects. We show that the presence of such effects in closed economies restricts the ability of the Taylor principle to prevent indeterminacy of the rational expectations equilibrium. The problem is exacerbated in open economies, particularly if the policy rule reacts to consumer-price, rather than domestic-price, inflation. However, determinacy can be restored in both closed and open economies with the addition of monetary policy inertia.

A comparative review of skill assessment: performance, prediction and profiling

The assessment of chess players is an increasingly attractive opportunity and an unfortunate necessity. The chess community needs to limit potential reputational damage by inhibiting cheating and unjustified accusations of cheating: there has been a recent rise in both. A number of counter-intuitive discoveries have been made by benchmarking the intrinsic merit of players’ moves: these call for further investigation. Is Capablanca actually, objectively the most accurate World Champion? Has ELO rating inflation not taken place? Stimulated by FIDE/ACP, we revisit the fundamentals of the subject to advance a framework suitable for improved standards of computational experiment and more precise results. Other domains look to chess as the demonstrator of good practice, including the rating of professionals making high-value decisions under pressure, personnel evaluation by Multichoice Assessment and the organization of crowd-sourcing in citizen science projects. The ‘3P’ themes of performance, prediction and profiling pervade all these domains.

Economic crises in England, 1270-1520: a statistical approach

The chapter examines how far medieval economic crises can be identified by analysing the residuals from a simultaneous equation model of the medieval English economy. High inflation, falls in gross domestic product and large intermittent changes in wage rates are all considered as potential indicators of crisis. Potential causal factors include bad harvests, wars and political instability. The chapter suggests that crises arose when a combination of different problems overwhelmed the capacity of government to address them. It may therefore be a mistake to look for a single cause of any crisis. The coincidence of separate problems is a more plausible explanation of many crises.

Do US macroeconomic forecasters exaggerate their differences?

Application of the Bernhardt et al. (Journal of Financial Economics 2006; 80(3): 657–675) test of herding to the calendar-year annual output growth and inflation forecasts suggests forecasters tend to exaggerate their differences, except at the shortest horizon, when they tend to herd. We consider whether these types of behaviour can help to explain the puzzle that professional forecasters sometimes make point predictions and histogram forecasts which are mutually inconsistent.

Low-frequency volatility of real estate securities in relation to macroeconomic risk

Real estate securities have a number of distinct characteristics that differentiate them from stocks generally. Key amongst them is that under-pinning the firms are both real as well as investment assets. The connections between the underlying macro-economy and listed real estate firms is therefore clearly demonstrated and of heightened importance. To consider the linkages with the underlying macro-economic fundamentals we extract the ‘low-frequency’ volatility component from aggregate volatility shocks in 11 international markets over the 1990-2014 period. This is achieved using Engle and Rangel’s (2008) Spline-Generalized Autoregressive Conditional Heteroskedasticity (Spline-GARCH) model. The estimated low-frequency volatility is then examined together with low-frequency macro data in a fixed-effect pooled regression framework. The analysis reveals that the low-frequency volatility of real estate securities has strong and positive association with most of the macroeconomic risk proxies examined. These include interest rates, inflation, GDP and foreign exchange rates.

Flexible selection of a single treatment incorporating short-term endpoint information in a phase II/III clinical trial

Seamless phase II/III clinical trials in which an experimental treatment is selected at an interim analysis have been the focus of much recent research interest. Many of the methods proposed are based on the group sequential approach. This paper considers designs of this type in which the treatment selection can be based on short-term endpoint information for more patients than have primary endpoint data available. We show that in such a case, the familywise type I error rate may be inflated if previously proposed group sequential methods are used and the treatment selection rule is not specified in advance. A method is proposed to avoid this inflation by considering the treatment selection that maximises the conditional error given the data available at the interim analysis. A simulation study is reported that illustrates the type I error rate inflation and compares the power of the new approach with two other methods: a combination testing approach and a group sequential method that does not use the short-term endpoint data, both of which also strongly control the type I error rate. The new method is also illustrated through application to a study in Alzheimer's disease. © 2015 The Authors. Statistics in Medicine Published by John Wiley & Sons Ltd.

CLEC-2 and Syk in the megakaryocytic/platelet lineage are essential for development

The C-type lectin receptor CLEC-2 signals through a pathway that is critically dependent on the tyrosine kinase Syk. We show that homozygous loss of either protein results in defects in brain vascular and lymphatic development, lung inflation, and perinatal lethality. Furthermore, we find that conditional deletion of Syk in the hematopoietic lineage, or conditional deletion of CLEC-2 or Syk in the megakaryocyte/platelet lineage, also causes defects in brain vascular and lymphatic development, although the mice are viable. In contrast, conditional deletion of Syk in other hematopoietic lineages had no effect on viability or brain vasculature and lymphatic development. We show that platelets, but not platelet releasate, modulate the migration and intercellular adhesion of lymphatic endothelial cells through a pathway that depends on CLEC-2 and Syk. These studies found that megakaryocyte/platelet expression of CLEC-2 and Syk is required for normal brain vasculature and lymphatic development and that platelet CLEC-2 and Syk directly modulate lymphatic endothelial cell behavior in vitro.

Tests of sunspot number sequences: 3. Effects of regression procedures on the calibration of historic sunspot data

We use sunspot group observations from the Royal Greenwich Observatory (RGO) to investigate the effects of intercalibrating data from observers with different visual acuities. The tests are made by counting the number of groups RB above a variable cut-off threshold of observed total whole-spot area (uncorrected for foreshortening) to simulate what a lower acuity observer would have seen. The synthesised annual means of RB are then re-scaled to the full observed RGO group number RA using a variety of regression techniques. It is found that a very high correlation between RA and RB (rAB > 0.98) does not prevent large errors in the intercalibration (for example sunspot maximum values can be over 30 % too large even for such levels of rAB). In generating the backbone sunspot number (RBB), Svalgaard and Schatten (2015, this issue) force regression fits to pass through the scatter plot origin which generates unreliable fits (the residuals do not form a normal distribution) and causes sunspot cycle amplitudes to be exaggerated in the intercalibrated data. It is demonstrated that the use of Quantile-Quantile (“Q  Q”) plots to test for a normal distribution is a useful indicator of erroneous and misleading regression fits. Ordinary least squares linear fits, not forced to pass through the origin, are sometimes reliable (although the optimum method used is shown to be different when matching peak and average sunspot group numbers). However, other fits are only reliable if non-linear regression is used. From these results it is entirely possible that the inflation of solar cycle amplitudes in the backbone group sunspot number as one goes back in time, relative to related solar-terrestrial parameters, is entirely caused by the use of inappropriate and non-robust regression techniques to calibrate the sunspot data.

Modelling the medieval economy: money, prices and income in England, 1263-1520

This chapter presents a simple econometric model of the medieval English economy, focusing on the relationship between money, prices and incomes. The model is estimated using annual data for the period 1263-1520 obtained from various sources. The start date is determined by the availability of continuous runs of annual data, while the finishing date immediately precedes the take-off of Tudor price inflation. Accounts from the ecclesiastical and monastic estates have survived in great numbers for this period, thereby ensuring that crop yields can be estimated from a regionally representative set of estates.

CDM accelerating cosmology as an alternative to Lambda CDM model

A new accelerating cosmology driven only by baryons plus cold dark matter (CDM) is proposed in the framework of general relativity. In this scenario the present accelerating stage of the Universe is powered by the negative pressure describing the gravitationally-induced particle production of cold dark matter particles. This kind of scenario has only one free parameter and the differential equation governing the evolution of the scale factor is exactly the same of the Lambda CDM model. For a spatially flat Universe, as predicted by inflation (Omega(dm) + Omega(baryon) = 1), it is found that the effectively observed matter density parameter is Omega(meff) = 1 - alpha, where alpha is the constant parameter specifying the CDM particle creation rate. The supernovae test based on the Union data (2008) requires alpha similar to 0.71 so that Omega(meff) similar to 0.29 as independently derived from weak gravitational lensing, the large scale structure and other complementary observations.

Predictions from an anisotropic inflationary era

This paper investigates the predictions of an inflationary phase starting from a homogeneous and anisotropic universe of the Bianchi I type. After discussing the evolution of the background spacetime, focusing on the number of e-folds and the isotropization, we solve the perturbation equations and predict the power spectra of the curvature perturbations and gravity waves at the end of inflation. The main features of the early anisotropic phase is (1) a dependence of the spectra on the direction of the modes, (2) a coupling between curvature perturbations and gravity waves and (3) the fact that the two gravity wave polarizations do not share the same spectrum on large scales. All these effects are significant only on large scales and die out on small scales where isotropy is recovered. They depend on a characteristic scale that can, but a priori must not, be tuned to some observable scale. To fix the initial conditions, we propose a procedure that generalizes the one standardly used in inflation but that takes into account the fact that the WKB regime is violated at early times when the shear dominates. We stress that there exist modes that do not satisfy the WKB condition during the shear-dominated regime and for which the amplitude at the end of inflation depends on unknown initial conditions. On such scales, inflation loses its predictability. This study paves the way for the determination of the cosmological signature of a primordial shear, whatever the Bianchi I spacetime. It thus stresses the importance of the WKB regime to draw inflationary predictions and demonstrates that, when the number of e-folds is large enough, the predictions converge toward those of inflation in a Friedmann-Lemaitre spacetime but that they are less robust in the case of an inflationary era with a small number of e-folds.

The influence of ARIMA-GARCH parameters in feed forward neural networks prediction

The objective of this article is to find out the influence of the parameters of the ARIMA-GARCH models in the prediction of artificial neural networks (ANN) of the feed forward type, trained with the Levenberg-Marquardt algorithm, through Monte Carlo simulations. The paper presents a study of the relationship between ANN performance and ARIMA-GARCH model parameters, i.e. the fact that depending on the stationarity and other parameters of the time series, the ANN structure should be selected differently. Neural networks have been widely used to predict time series and their capacity for dealing with non-linearities is a normally outstanding advantage. However, the values of the parameters of the models of generalized autoregressive conditional heteroscedasticity have an influence on ANN prediction performance. The combination of the values of the GARCH parameters with the ARIMA autoregressive terms also implies in ANN performance variation. Combining the parameters of the ARIMA-GARCH models and changing the ANN`s topologies, we used the Theil inequality coefficient to measure the prediction of the feed forward ANN.

Economic growth in Sweden, 2000-2010 : The dot-com bubble and the financial crisis

    Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. The total output is the quantity of goods or servicesproduced in a given time period within a country. Sweden was affected by two crises during the period 2000-2010: a dot-com bubble and a financial crisis. How did these two crises affect the economic growth?     The changes of domestic output can be separated into four parts: changes in intermediate demand, final domestic demand, export demand and import substitution. The main purpose of this article is to analyze the economic growth during the period 2000-2010, with focus on the dot-com bubble in the beginning of the period 2000-2005, and the financial crisis at the end of the period 2005-2010. The methodology to be used is the structural decomposition method.     This investigation shows that the main contributions to the Swedish total domestic output increase in both the period 2000-2005 and the period 2005-2010 were the effect of domestic demand. In the period 2005-2010, financial crisis weakened the effect of export. The output of the primary sector went from a negative change into a positive, explained mainly by strong export expansion. In the secondary sector, export had most effect in the period 2000-2005. Nevertheless, domestic demand and import ratio had more effect during the financial crisis period. Lastly, in the tertiary sector, domestic demand can mainly explain the output growth in the whole period 2000-2010.

Determinants and effects of central bank independence reforms

This thesis consists of four empirically oriented papers on central bank independence (CBI) reforms.    Paper [1] is an investigation of why politicians around the world have chosen to give up power to independent central banks, thereby reducing their ability to control the economy. A new data-set, including the possible occurrence of CBI-reforms in 132 countries during 1980-2005, was collected. Politicians in non-OECD countries were more likely to delegate power to independent central banks if their country had been characterized by high variability in inflation and if they faced a high probability of being replaced. No such effects were found for OECD countries.    Paper [2], using a difference-in-difference approach, studies whether CBI reform matters for inflation performance. The analysis is based on a dataset including the possible occurrence of CBI-reforms in 132 countries during the period of 1980-2005. CBI reform is found to have contributed to bringing down inflation in high-inflation countries, but it seems unrelated to inflation performance in low-inflation countries.    Paper [3] investigates whether CBI-reforms are important in reducing inflation and maintaining price stability, using a random-effects random-coefficients model to account for heterogeneity in the effects of CBI-reforms on inflation. CBI-reforms are found to have reduced inflation on average by 3.31 percent, but the effect is only present when countries with historically high inflation rates are included in the sample. Countries with more modest inflation rates have achieved low inflation without institutional reforms that grant central banks more independence, thus undermining the time-inconsistency theory case for CBI. There is furthermore no evidence that CBI-reforms have contributed to lower inflation variability    Paper [4] studies the relationship between CBI and a suggested trade-off between price variability and output variability using data on CBI-levels, and data the on implementation dates of CBI-reforms. The results question the existence of such a trade-off, but indicate that there may still be potential gains in stabilization policy from CBI-reforms.