From early 1994 to early 1995, inflation surged in the producer price indexes for crude materials and intermediate goods. For example, inflation in intermediate goods prices rose from 2.6 percent annually in the first half of 1994 to 7.1 percent over the next nine months. At the same time,...

This study examines the problem of forecasting an aggregate of cointegrated disaggregates. It first establishes conditions under which forecasts of an aggregate variable obtained from a disaggregate VECM will be equal to those from an aggregate, univariate time series model, and develops a...

This paper evaluates potential explanations for the sometimes poor forecasting performance of the Phillips curve. One explanation is that out-of-sample metrics are noisy or, equivalently, have relatively low power. Another potential explanation is instability in the coefficients of the model. To...

Ashley, Granger, and Schmalensee (1980) and Diebold and Mariano (1995) suggest that forecast comparisons may be used to examine Granger causality. According to Ashley et al., if forecasts of y based on a VAR model in x and y are superior to those based on an AR model for y , then x carries...

We document that business cycles of U.S. Census regions are substantially more synchronized than those of European Union countries, both over the past four decades and the past two decades. Data from regions within the four largest European countries confirm the presence of a European border...

This paper reexamines whether producer prices help predict consumer prices, focusing on model stability and the forecasting performance of time-varying parameter models. In bivariate models, producer price inflation consistently Granger-causes consumer price inflation in-sample but fails to...

This paper uses Monte Carlo experiments to examine the small-sample properties of some commonly used tests of equal forecast accuracy. The study pays particular attention to test power, evaluated using both asymptotic and empirical critical values. In addition to evaluating different tests, this...