We propose a new approach to deal with structural breaks in time series models. The key contribution is an alternative dynamic stochastic specification for the model parameters which describes potential breaks. After a break new parameter values are generated from a so-called baseline prior...

This paper develops a Markov-Switching vector autoregressive model that allows for imperfect synchronization of cyclical regimes in multiple variables, due to phase shifts of a single common cycle. The model has three key features: (i) the amount of phase shift can be different across regimes...

This paper examines which macroeconomic and financial variables are most informative for the federal funds target rate decisions made by the Federal Open Market Committee (FOMC) from a forecasting perspective. The analysis is conducted for the FOMC decision during the period January 1990 - June...

Experts can rely on statistical model forecasts when creating their own forecasts. Usually it is not known what experts actually do. In this paper we focus on three questions, which we try to answer given the availability of expert forecasts and model forecasts. First, is the expert forecast...

This paper conducts an empirical analysis of the heterogeneity of recessions inmonthly U.S. coincident and leading indicator variables. Univariate Markovswitchingmodels indicate that it is appropriate to allow for two distinct recessionregimes, corresponding with ‘mild’ and ‘severe’...

Many decision problems in various fields of application can be characterized as diagnostic problems trying to assess the true state (of the world) of given cases. The investigation of assessment criteria improves the initial information according to observed signal outcomes, which are related to...

In recent times DSGE models came more and more into the focus of forecasters and showed promising forecast performances for the short term. We contribute to the existing literature by analyzing the forecast power of a DSGE model including endogenous growth for the medium run. Instead of only...

Two Bayesian sampling schemes are outlined to estimate a K-state Markov switching model with time-varying transition probabilities. The multinomial logit model for the transition probabilities is alternatively expressed as a random utility model and as a difference random utility model. The...