Type-1 error inflation in the traditional by-participant analysis to metamemory accuracy: a generalized mixed-effects model perspective

In order to examine metacognitive accuracy (i.e., the relationship between metacognitive judgment and memory performance), researchers often rely on by-participant analysis, where metacognitive accuracy (e.g., resolution, as measured by the gamma coefficient or signal detection measures) is computed for each participant and the computed values are entered into group-level statistical tests such as the t-test. In the current work, we argue that the by-participant analysis, regardless of the accuracy measurements used, would produce a substantial inflation of Type-1 error rates, when a random item effect is present. A mixed-effects model is proposed as a way to effectively address the issue, and our simulation studies examining Type-1 error rates indeed showed superior performance of mixed-effects model analysis as compared to the conventional by-participant analysis. We also present real data applications to illustrate further strengths of mixed-effects model analysis. Our findings imply that caution is needed when using the by-participant analysis, and recommend the mixed-effects model analysis.

Forecast uncertainty—ex Ante and ex Post: U.S. inflation and output growth

Survey respondents who make point predictions and histogram forecasts of macro-variables reveal both how uncertain they believe the future to be, ex ante, as well as their ex post performance. Macroeconomic forecasters tend to be overconfident at horizons of a year or more, but overestimate (i.e., are underconfident regarding) the uncertainty surrounding their predictions at short horizons. Ex ante uncertainty remains at a high level compared to the ex post measure as the forecast horizon shortens. There is little evidence of a link between individuals’ ex post forecast accuracy and their ex ante subjective assessments.

Meta-analysis to integrate effect sizes within a paper: Possible misuse and Type-1 error inflation

In recent years an increasing number of papers have employed meta-analysis to integrate effect sizes of researchers’ own series of studies within a single paper (“internal meta-analysis”). Although this approach has the obvious advantage of obtaining narrower confidence intervals, we show that it could inadvertently inflate false-positive rates if researchers are motivated to use internal meta-analysis in order to obtain a significant overall effect. Specifically, if one decides whether to stop or continue a further replication experiment depending on the significance of the results in an internal meta-analysis, false-positive rates would increase beyond the nominal level. We conducted a set of Monte-Carlo simulations to demonstrate our argument, and provided a literature review to gauge awareness and prevalence of this issue. Furthermore, we made several recommendations when using internal meta-analysis to make a judgment on statistical significance.

Accounting quality, information risk and implied volatility around earnings announcements

We examine the impact of accounting quality, used as a proxy for information risk, on the behavior of equity implied volatility around quarterly earnings announcements. Using US data during 1996–2010, we observe that lower (higher) accounting quality significantly relates to higher (lower) levels of implied volatility (IV) around announcements. Worse accounting quality is further associated with a significant increase in IV before announcements, and is found to relate to a larger resolution in IV after the announcement has taken place. We interpret our findings as indicative of information risk having a significant impact on implied volatility behavior around earnings announcements.

The impact of the elderly on inflation rates in developed countries

What explains the cross-national variation in inflation rates in developed countries? Previous literature has emphasised the role of ideas and institutions, and to a lesser extent interest groups, while leaving the role of electoral politics comparatively unexplored. This paper seeks to redress this neglect by focusing on one case where electoral politics matters for inflation: the share of the population above 65 years old in a country. I argue that countries with a larger share of elderly have lower inflation because older people are both more inflation averse and politically powerful, forcing governments to pursue lower inflation. I test my argument in three steps. First, logistic regression analysis of survey data confirms older people are more inflation averse. Second, panel data regression analysis of party manifesto data reveals that European countries with more old people have more economically orthodox political parties. Third, time series cross-section regression analyses demonstrate that the share of the elderly is negatively correlated with inflation in both a sample of 21 advanced OECD economies and a larger sample of 175 countries. Ageing may therefore push governments to adopt a low inflation regime.

CMB and LSS constraints on a single-field model of inflation

A new inflationary scenario whose exponential potential V (Phi) has a quadratic dependence on the field Phi in addition to the standard linear term is confronted with the five-year observations of the Wilkinson-Microwave Anisotropy Probe and the Sloan Digital Sky Survey data. The number of e-folds (N), the ratio of tensor-to-scalar perturbations (r), the spectral scalar index of the primordial power spectrum (n(s)) and its running (dn(s)/d ln k) depend on the dimensionless parameter a multiplying the quadratic term in the potential. In the limit a. 0 all the results of the exponential potential are fully recovered. For values of alpha not equal 0, we find that the model predictions are in good agreement with the current observations of the Cosmic Microwave Background (CMB) anisotropies and Large-Scale Structure (LSS) in the Universe. Copyright (C) EPLA, 2008.

MODELLING AND FORECASTING INFLATION RATES IN GHANA: AN APPLICATION OF SARIMA MODELS

Ghana faces a macroeconomic problem of inflation for a long period of time. The problem in somehow slows the economic growth in this country. As we all know, inflation is one of the major economic challenges facing most countries in the world especially those in African including Ghana. Therefore, forecasting inflation rates in Ghana becomes very important for its government to design economic strategies or effective monetary policies to combat any unexpected high inflation in this country. This paper studies seasonal autoregressive integrated moving average model to forecast inflation rates in Ghana. Using monthly inflation data from July 1991 to December 2009, we find that ARIMA (1,1,1)(0,0,1)12 can represent the data behavior of inflation rate in Ghana well. Based on the selected model, we forecast seven (7) months inflation rates of Ghana outside the sample period (i.e. from January 2010 to July 2010). The observed inflation rate from January to April which was published by Ghana Statistical Service Department fall within the 95% confidence interval obtained from the designed model. The forecasted results show a decreasing pattern and a turning point of Ghana inflation in the month of July.

Are central bank independence reforms necessary for achieving low and stable inflation?

Using data on the occurence of central bank independence (CBI) reforms in 131 countries during 1980-2005, we test whether they were important in reducing inflation and maintaining price stability. CBI reforms are found to have reduced inflation on average 3.31% when countries with historically high inflation rates are included. But countries with lower inflation have reduced it without institutional reforms granting central banks more independence, undermining the theoretical time-inconsistency case for CBI. There is furthermore no evidence that CBI reforms have helped reduce inflation variability.

Effects of central bank independence reforms on inflation in different parts of the world

The purpose of this study is to analyze the effect of CBI-reforms on inflation in different parts of the world from a theoretical and empirical perspective. Compared to previous studies, this study focuses on whether CBI-reforms have different effects on reducing inflation in different parts of the world. The study is based on a 132 country data-set from 1980 to 2005 compiled by Daunfeldt et al. (2008). The result indicates that the reduction in inflation due to the CBI-reforms varies between 2.2 and 12.32 percentage points in Asia, Europe, South America and Oceania, supporting the claim that implementing CBI-reforms can be successful in reducing inflation in most of the parts of the world.

What is 'political communication'? The rationale and scope of the implied freedom of political communication

The aim of this article is to identify what counts as ‘political communication’ for the purposes of the implied constitutional freedom of political communication. This is done for two reasons. The first is to delimit the scope of the implied freedom. The second is to clarify whether racial vilification is ‘political communication’, which is the initial step that must be taken in order to assess the constitutionality or otherwise of current Australian racial vilification laws. It is, however, necessary and desirable to establish a sound theoretical basis for the implied freedom before these questions can be properly considered. To this end, it is argued that a minimalist model of judicially-protected popular sovereignty underpins the implied freedom and is the rationale that must guide its interpretation and application. The analysis undertaken demonstrates that a generous zone of ‘political communication’ must attract constitutional protection and that racial vilification will in certain circumstances amount to ‘political communication’.

Forecasting inflation, industrial output and exchange rates : a template study for India

This paper reports results from a forecasting study for inflation, industrial output and exchange rates for India. We cannot reject the null hypothesis for linearity for all series used except for the growth rate of the foreign exchange series and our analysis is based on linear models, ARIMA and bivariate transfer functions and restricted VAR. Forecasting performance is evaluated using the models’ root mean-squared error differences and Theil’s inequality coefficients from recursive origin static, fixed origin dynamic and rolling origin dynamic forecasts. For models based on weekly data, based on RMSEs, we find that the bivariate models improve upon the forecasts of the ARIMA model while for models based on monthly data the ARIMA model has almost always better performance. In choosing between the two bivariate models on the basis of RMSEs, our overall results tend to support the use of a restricted VAR, as this model had the best forecasting performance more frequently than the transfer function model.

Costs of inflation in Australia and New Zealand.

This paper evaluates the costs of inflation in Australia and New Zealand using a compensated measure calculated by calibrating a general equilibrium search model in the vein of Lagos and Wright (2005). We look at how inflation affects the intensive margin (the quantity traded in each match) by examining the impact of various pricing protocols. We also look at how inflation affects the extensive margin (the number of trades) by making the market composition between buyers and sellers endogenous. We obtain much larger costs of inflation than existing studies, but smaller costs than similar studies conducted on the US economy. Depending on the version of the model the costs of 10% inflation for a $50,000 worker ranges from $250 to $2200 per year in Australia, and from $200 to $1700 in New Zealand, that is between 0.5% and 4.4% of GDP and between 0.4% and 3.4% of GDP respectively. Finally it is calculated that Australia could gain up to 1.6% of GDP per annum--1.2% for New Zealand--by implementing the Friedman rule.

Forecasting industry-level CPI and PPI inflation : does exchange rate pass-through matter?

We show that incorporating the effects of exchange rate pass-through into a model can help in obtaining superior forecasts of domestic, industry-level inflation. Our analysis is based on a multivariate system of domestic inflation, import prices and exchange rates that incorporates restrictions from economic theory. These are restrictions on the transmission channels of the exchange rate pass-through to domestic prices, and are presented as testable hypotheses that lead to model reduction. We provide the results of various tests, including causality and prior restrictions, which support the underlying economic arguments and the model we use. The forecasting results for our model suggest that it has a superior performance overall, jointly producing more accurate forecasts of domestic inflation.

Modeling the relationship between budget deficits, money supply and inflation in Fiji

For Fiji, which has been suffering persistent deficits since independence, determining the relationships between inflation, budget deficits, money supply, output, and import prices is essential. We find that inflation, deficits and money supply are cointegrated when inflation is the endogenous variable, and the long-run elasticities confirm that money supply and deficits induce inflation. While there is a short-run, unidirectional causality running from money supply to inflation and a bi-directional causality between money supply and budget deficits, in the long run both money supply and deficits ?Granger-cause? inflation.