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(Un)Predictability and Macroeconomic Stability

Author

Listed:
  • 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'

Suggested Citation

  • Antonello D'Agostino & Domenico Giannone & Paolo Surico, 2005. "(Un)Predictability and Macroeconomic Stability," Macroeconomics 0510024, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0510024
    Note: Type of Document - pdf; pages: 29
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    predictive accuracy; macroeconomic stability; forecasting models; sub-sample analysis; Fed Green book.;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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