Small-scale VARs have come to be widely used in macroeconomics, for purposes ranging from forecasting output, prices, and interest rates to modeling expectations formation in theoretical models. However, a body of recent work suggests such VAR models may be prone to instabilities. In the face of...

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...

This paper examines the asymptotic and finite-sample properties of tests of equal forecast accuracy applied to direct, multi-step predictions from both non-nested and nested linear regression models. In contrast to earlier work in the literature, our asymptotics take account of the real-time,...

This paper presents analytical, Monte Carlo, and empirical evidence on combining recursive and rolling forecasts when linear predictive models are subject to structural change. Using a characterization of the bias-variance tradeoff faced when choosing between either the recursive and rolling...

Recent work suggests VAR models of output, inflation, and interest rates may be prone to instabilities. In the face of such instabilities, a variety of estimation or forecasting methods might be used to improve the accuracy of forecasts from a VAR. The uncertainty inherent in any single...

From 1975 to 1980, inflation in core (nonfood and nonenergy) consumer prices rose sharply as crude oil prices more than tripled. Yet, as crude oil prices quadrupled from late 2001 to 2007, core consumer price inflation remained essentially flat. Some observers have attributed the stability of...

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...