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Estimating Phillips Curves in Turbulent Times using the ECB’s Survey of Professional Forecasters
Get PDFThis paper uses forecasts from the European Central Bank's Survey of Professional Forecasters to investigate the relationship between inflation and inflation expectations in the euro area. We use theoretical structures based on the New Keynesian and Neoclassical Phillips curves to inform
our empirical work. Given the relatively short data span of the Survey of Professional Forecasters and the need to control for many explanatory variables,
we use dynamic model averaging in order to ensure a parsimonious econometric speci cation. We use both regression-based and VAR-based methods.
We find no support for the backward looking behavior embedded in the Neo-classical Phillips curve. Much more support is found for the forward looking behavior of the New Keynesian Phillips curve, but most of this support is found after the beginning of the financial crisis
Understanding Liquidity and Credit Risks in the Financial Crisis
Get PDFThis paper develops a structured dynamic factor model for the spreads between London Interbank Offered Rate (LIBOR) and overnight
index swap (OIS) rates for a panel of banks. Our model involves latent factors which reflect liquidity and credit risk. Our empirical results show that surges in the short term LIBOR-OIS spreads during the 2007-2009 fi nancial crisis were largely driven by liquidity risk.
However, credit risk played a more signifi cant role in the longer term
(twelve-month) LIBOR-OIS spread. The liquidity risk factors are more volatile than the credit risk factor. Most of the familiar events in the financial crisis are linked more to movements in liquidity risk than credit risk
A Nonlinear Panel Unit Root Test under Cross Section Dependence
Get PDFWe propose a nonlinear heterogeneous panel unit root test for testing the null
hypothesis of unit-roots processes against the alternative that allows a proportion
of units to be generated by globally stationary ESTAR processes and a remaining
non-zero proportion to be generated by unit root processes. The proposed test is
simple to implement and accommodates cross sectional dependence. We show that
the distribution of the test statistic is free of nuisance parameters as (N, T) −!
1. Monte Carlo simulation shows that our test holds correct size and under the
hypothesis that data are generated by globally stationary ESTAR processes has a
better power than the recent test proposed in Pesaran [2007]. Various applications
are provided
The Effects of Budget 2011 on Activity in the UK Continental Shelf
Get PDFNORTH SEA STUDY OCCASIONAL PAPER
No. 12
Eye Care Service in Scotland: Did the Scots Get it Right?
Get PDFIn March 2004, the Scottish government announced a review of eye care services in Scotland, which culminated in the introduction of free eye examinations from 1st April 2006. This free eye examination is not just a sight test; it is a thorough examination to check the health of the patient’s eyes and to look for signs of other health problems. The Scottish government commissioned private ophthalmic optician practices to perform these eye examinations.
Consequently, since April 2006 individuals in Scotland could walk into any high street optometry practice and get a ‘free’ eye examination funded under the NHS
Is Graduate Under-employment Persistent? Evidence from the United Kingdom
Get PDFThis paper examines the persistence of under-employment amongst UK higher education graduates. For the cohort of individuals who graduated in 2002/3, micro-data collected by the Higher Education Statistical Agency, are used to calculate the rates of "non-graduate job" employment 6 months and 42 months after graduation. A logic regression analysis suggests the underemployment is not a short-term phenomenon and is systematically related to a set of observable characteristics. It is also found that under-employment 42 months after graduation, which is consistent with the view that the nature of the first job after graduation is important in terms of occupational attainment later in the life-cycle
International Capital Flows to Emerging and Developing Countries: National and Global Determinants
Get PDFThis paper examines international capital flows to emerging and developing countries.
We assess whether commonalities exist, the permanence of shocks to commonalities and
their determinants. Also, we consider individual country coherence with global capital flows and we measure the extent of co-movements in the volatility of capital flows. Our results suggest there are commonalities in capital inflows, although aggregate or disaggregate capital flows respond differently to shocks. We find that the US long run real interest rate is an important determinant of global capital flows, and real commodity
prices are relevant but to a lesser extent. We also find a role for human capital in
explaining why some countries can successfully ride the wave of financial globalisation
Trade in bilateral oligopoly with endogenous market formation
Get PDFWe study a strategic market game in which traders are endowed with both a good and money and can choose whether to buy or sell
the good. We derive conditions under which a non-autarkic equilibrium exists and when the only equilibrium is autarky. Autarky is ‘nice’ (robust to small perturbations in the game) when it is the only equilibrium,
and ‘very nice’ (robust to large perturbations) when no gains from trade exist. We characterize economies where autarky is nice but not very nice; that is, when gains from trade exist and yet no trade
takes place
Forecasting with Medium and Large Bayesian VARs
Get PDFThis paper is motivated by the recent interest in the use of Bayesian VARs for
forecasting, even in cases where the number of dependent variables is large. In such cases, factor methods have been traditionally used but recent work using a
particular prior suggests that Bayesian VAR methods can forecast better. In this
paper, we consider a range of alternative priors which have been used with small
VARs, discuss the issues which arise when they are used with medium and large
VARs and examine their forecast performance using a US macroeconomic data set containing 168 variables. We nd that Bayesian VARs do tend to forecast better than factor methods and provide an extensive comparison of the strengths and weaknesses of various approaches. Our empirical results show the importance of using forecast metrics which use the entire predictive density, instead of using only point forecasts
Forecasting US bond default ratings allowing for previous and initial state dependence in an ordered probit model
Get PDFIn this paper we investigate the ability of a number of different ordered probit models to predict ratings based on firm-specific data on business and financial risks. We investigate models based on momentum, drift and ageing and compare them against alternatives that take into account the initial rating of the firm and its previous actual rating. Using data on US bond
issuing firms rated by Fitch over the years 2000 to 2007 we compare the performance of these models in predicting the rating in-sample and out-of-sample using root mean squared errors, Diebold-Mariano tests of forecast performance and contingency tables. We conclude that initial and previous states have a substantial influence on rating prediction