Economic modelling
Fed forecasts overcompensate for trend deviations, paper says
Federal Reserve tends to “overpredict” growth when the economy is running below trend
BoE paper hunts for shifts in forecast accuracy
Authors outline new method of detecting when forecasts break down
RBA paper offers new way to add housing sector to DSGE models
Authors find their model delivers “reasonable” forecast performance
Yield curve can help improve forecasts – RBNZ economists
Yield curve information tends to improve forecasts of economic activity, researchers find
BIS’s da Silva defends DSGE modelling efforts
The models have not performed as badly as critics claim and new research efforts are creating fresh possibilities, says BIS’s deputy general manager
Financial frictions key to DSGE performance – NY Fed paper
Post-crisis period was a harsh testing ground for structural models, but the New York Fed’s DSGE model was at least equal to private forecasts, researchers say
NY Fed paper studies when government should issue safe assets
Model implies only under certain situations should the government issue new debt; changing inflation target might be superior
Central bank communications risk circularity, says BIS paper
Policy communications influence market prices and market prices influence policy, warn Stephen Morris and Hyun Song Shin
Fed paper models risk-taking channel of monetary policy
Model in which monetary expansion increases risk-taking appears to fit with the data
Economists need to better understand macrofinancial links – BIS paper
Stijn Claessens and Ayhan Kose call for “new generation of models” among other research to solve ongoing puzzles
Combined nowcasts can improve GDP estimates – paper
Paper compares performance of nowcast models in estimating GDP from 2016–2015
Veteran economists weigh in on ‘rebuilding’ macro theory
Economists including Olivier Blanchard, Andy Haldane and Simon Wren-Lewis tackle the question of how – and whether – to save the DSGE model
Fed paper sets out model of financial panics
Mark Gertler, Nobuhiro Kiyotaki and Andrea Prestipino examine banking panics in a DSGE model
Policymakers need wider range of systemic risk models – paper
Researchers attempt to combine systemic importance and systemic risk approaches
BoE seeks to enhance stress-test model oversight
Prudential Regulatory Authority to enforce new stress-test model principles in 2018; smaller banks asked to tailor them to their operations
Haldane outlines ‘interdisciplinary’ economics model
Andy Haldane and Arthur Turrell describe a way of broadening the scope of economics’ limited array of core models
NY Fed economists reveal big-data approach to nowcasting
Paper sets out the New York Fed’s model for producing early estimates of major indicators
Central banks should combine monetary rules to achieve objectives – research
Estimates based on different models should be updated regularly, authors say
Text mining reveals differences in PRA approach
Researchers compare Prudential Regulation Authority’s communications to its predecessor using a machine-learning algorithm
BoE paper adds time-varying parameters to DSGE model
Method allows parameters to shift over time as the structure of the economy changes, yielding improvements to forecasting
IMF’s Adrian sketches macro-financial model of term premium
Tobias Adrian outlines a new way of modelling financial cycles within a New Keynesian framework, which produces a good fit with empirical observations on the term structure
San Francisco Fed economist explores methods to forecast interest rates
Michael Bauer aims to forecast interest rates based on the current level and long-run trend, and a narrative linking both
Piecing together a financial theory of stagnation
Ideas presented at recent BIS annual meetings reveal an emerging framework that explains how the financial system may be dragging down the real economy; Hélène Rey was the latest to contribute
Paper proposes method to estimate network of exposures
Researcher draws on aggregate exposures and market data to build a more complete picture of the network of bank exposures