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(Un)Predictability and Macroeconomic Stability

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Author Info

  • Antonello D'Agostino

    (ECARES, Universite' Libre de Bruxelles)

  • Domenico Giannone

    (ECARES, Universite' Libre de Bruxelles)

  • Paolo Surico

    (Bank of England & University of Bari)

Abstract

This paper documents a new stylized fact of the U.S. greater macroeconomic stability of the last two decades or so. Using 131 monthly time series, three popular statistical methods and the forecasts of the Federal Reserve's Green book and the Survey of Professional Forecasters, we show that the ability of predicting several measures of inflation and real activity, relative to naive forecasts, declined remarkably across most models and horizons since the mid-1980s. This fact appears to reflect a prominent feature of the recent observations and thus represents a new challenge for competing explanations of the 'Great Moderation'

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File URL: http://128.118.178.162/eps/mac/papers/0510/0510024.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0510024.

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Length: 29 pages
Date of creation: 28 Oct 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0510024

Note: Type of Document - pdf; pages: 29
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Web page: http://128.118.178.162

Related research

Keywords: predictive accuracy; macroeconomic stability; forecasting models; sub-sample analysis; Fed Green book.;

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References

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