This paper addresses the notion of an "optimum level of financial activity" that is contingent on a country's general level of development. Referring to threshold regressions and a bootstrap test for structural shift of the finance regressor in a growth equation, it is shown that countries gain...

In this paper we extend the targeted-regressor approach suggested in Bai and Ng (2008) for variables sampled at the same frequency to mixed-frequency data. Our MIDASSO approach is a combination of the unrestricted MIxed-frequency DAta-Sampling approach (U-MIDAS) (see Foroni et al., 2015; Castle et...

Google Trends have become a popular data source for social science research. We show that for small countries or sub-national regions like U.S. states, underlying sampling noise in Google Trends can be substantial. The data may therefore be unreliable for time series analysis and is furthermore...

This article re-examines the findings of Stock and Watson (2012b) who assessed the predictive performance of dynamic factor models (DFM) over autoregressive (AR) bench-marks for hundreds of target variables by focusing on possible business cycle performance asymmetries in the spirit of Chauvet...

This paper tests the usefulness of time-varying parameters when forecasting with mixed-frequency data. For this we compare the forecast performance of bridge equations and unrestriced MIDAS models with constant and time-varying parameters. An out-of-sample forecasting exercise with US real-time...

We propose a Bayesian optimal filtering setup for improving out-of-sample forecasting performance when using volatile high frequency data with long lag structure for forecasting low-frequency data. We test this setup by using real-time Swiss construction investment and construction permit data....

We estimate a multivariate unobserved components-stochastic volatility model to explain the dynamics of a panel of six exchange rates against the US Dollar. The empirical model is based on the assumption that both countries' monetary policy strategies may be well described by Taylor rules with a...

Measuring economic activity in real-time is a crucial issue in applied research and in the decision-making process of policy makers; however, it also poses intricate challenges to statistical filtering methods that are built to operate optimally under the auspices of an infinite number of...

We propose a multivariate Bayesian state space model to identify potential growth and the output gap consistent with the dynamics of the underlying production sectors of the economy and those of inflation and the labor market. Our approach allows us to decompose economic fluctuations and...

This paper proposes a multi-level dynamic factor model to identify common components in output gap estimates. We pool multiple output gap estimates for 157 countries and decompose them into one global, eight regional, and 157 country-specific cycles. Our approach easily deals with mixed...