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(Un)Predictability and macroeconomic stability Author info | Abstract | Publisher info | Download info | Related research | Statistics Antonello D’Agostino () (Address for correspondence: Central Bank and Financial Services Authority of Ireland - Economic Analysis and Research Departmant, PO Box 559 - Dame Street, Dublin 2, Ireland. )
Domenico Giannone () (ECARES, Université Libre de Bruxelles - CP 114 - av. Jeanne, 44, B-1050, Brussels, Belgium. )
Paolo Surico () (Monetary Assessment and Strategy, Bank of England, Threadneedle street - EC2R 8AH - London, United Kingdom. )
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This paper documents a new stylized fact of the greater macroeconomic stability of the U.S. economy over the last two decades. Using 131 monthly time series, three popular statistical methods and the forecasts of the Federal Reserve’s Greenbook and the Survey of Professional Forecasters, we show that the ability to predict several measures of inflation and real activity declined remarkably, relative to naive forecasts, since the mid-1980s. This break down in forecast ability appears to be an inherent feature of the most recent period and thus represents a new challenge for competing explanations of the ‘Great Moderation’. JEL Classification: E37; E47; C22; C53.
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Paper provided by European Central Bank in its series Working Paper Series with number
605.
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Length: 41 pages
Date of creation: Apr 2006Date of revision:
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Keywords: Predictive accuracy macroeconomic stability forecasting models sub-sample analysis Fed Greenbook. Other versions of this item:
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