(Un)Predictability and macroeconomic stability

D’Agostino, Antonello (), Domenico Giannone () and Paolo Surico ()
Additional contact information
D’Agostino, Antonello: Address for correspondence: Central Bank and Financial Services Authority of Ireland - Economic Analysis and Research Departmant, PO Box 559 - Dame Street, Dublin 2, Ireland., http://www.centralbank.ie/
Authors registered in the RePEc Author Service: Antonello D'Agostino ()

No 605, Working Paper Series from European Central Bank

Abstract: 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.

Keywords: Predictive accuracy; macroeconomic stability; forecasting models; sub-sample analysis; Fed Greenbook. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-for and nep-mac
Date: Written 2006-04
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Related works:
Working Paper: (Un)Predictability and Macroeconomic Stability (2007)
Working Paper: (Un)Predictability and Macroeconomic Stability (2005)
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