Advanced Search
MyIDEAS: Login

Forecasting (and Explaining) US Business Cycles

Contents:

Author Info

  • Muellbauer, John
  • Nunziata, Luca

Abstract

This Paper uses multi-step forecasting models at horizons of 4 and 8 quarters to forecast and explain the growth of real per capita US GDP. In the modeling strategy, a priori sign restrictions play an important role. They are imposed not on impulse response functions but directly on the reduced form single or multi-step equations, unlike in recent work by Uhlig and Canova. This is possible because in this context, the reduced form inherits important structural sign properties; basically, that autonomous expenditure has positive effects on near future GDP. We consider an economically large class of variables, including effects from interest rates, the credit channel and asset prices, the real exchange rate, yield spreads, inflation and interest rate volatility, oil prices (including asymmetries), structural breaks in fiscal and monetary policy, the recent behaviour of consumption, investment and profitability, and the evolutionary effect of globalization on the balance of payments constraint. We follow a general to specific methodology, including the help of PCGETS (Hendry and Krolzig, 2001) to reduce general models to more parsimonious ones. Relative to conventional VARs, our models imply longer lag structures than ever considered in VARs, as well as non-linearities, and so could never have been found with conventional VAR restrictions. Our results thus contradict the suggestion of Sims (1980) that VARs can resolve the problem of ‘incredible restrictions’ embodied in large macro econometric models. Our exercise of learning from the data through general to specific modeling is likely, in many cases, also to contradict the lag structures of such models. We present a range of models with remarkable recursive forecasting performance since 1982 and show that similar models could have been selected with 1982 data by applying similar methods then. Out of sample forecasts with such models since March 2001, when we forecast that 2001 would be a recession year, have also been successful.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cepr.org/pubs/dps/DP4584.asp
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4584.

as in new window
Length:
Date of creation: Aug 2004
Date of revision:
Handle: RePEc:cpr:ceprdp:4584

Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

Related research

Keywords: business cycles; fiscal policy; monetary policy; multi-step forecasting; oil shocks;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Martin Mandler, 2009. "Decomposing Federal Funds Rate forecast uncertainty using real-time data," MAGKS Papers on Economics 200947, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Bowdler, Christopher, 2009. "Openness, exchange rate regimes and the Phillips curve," Journal of International Money and Finance, Elsevier, vol. 28(1), pages 148-160, February.
  3. Mandler, Martin, 2007. "The Taylor rule and interest rate uncertainty in the U.S. 1955-2006," MPRA Paper 2340, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:4584. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.