Economics - Research Publications
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ItemNo Preview AvailableBetter understanding how uncertainty impacts the economy: Insights from internet search data on the importance of disaggregation(CAMBRIDGE UNIV PRESS, 2022-06-21)Abstract We study the impact of uncertainty shocks using a disaggregated model featuring US state-level unemployment, and uncertainty measured using state-level Google search data. Importantly, the model captures spillovers across states and identifies substantial differences in peak responses and time dynamics. Moreover, the importance of national factors in propagating the effect of uncertainty is also heterogeneous across states, but less relevant than state-level factors. These heterogeneous effects are related to state-specific industry compositions and fiscal positions. In addition, we highlight the usefulness of disaggregated data in models of uncertainty and economic activity for the USA, based on the superior ability of the disaggregate model to predict aggregate uncertainty and unemployment.
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ItemThe role of uncertainty, sentiment and cross-country interactions in G7 output dynamics(WILEY, 2018-05-01)Abstract Output fluctuations in the G7 are characterized using a VAR model of countries’ actual and expected outputs and uncertainty over these. New measures are developed to quantify the relative importance of economic prospects‐versus‐uncertainty, global‐versus‐national effects and fundamentals‐versus‐sentiment for countries’ persistent output movements. National and global contributions are found to be equally important across the G7 although considerable differences exist between countries. Uncertainty, and especially cross‐country uncertainty, is important in propagating the effects of shocks and generates around 20% of countries’ persistent output movements on average. Fundamentals dominate output movements although, with an 80:20 split, sentiment plays a non‐negligible role. Résumé Le rôle de l’incertitude, du sentiment, et des interactions entre pays dans la dynamique de production du G7. Les fluctuations du produit agrégé dans le G7 sont caractérisées par un modèle vectoriel autorégressif des produits observés et anticipés des pays, ainsi que de l’incertitude qui entoure ces mesures. De nouvelles mesures sont développées pour quantifier l’importance relative des perspectives‐versus‐l’incertitude, des effets globaux‐versus‐nationaux, et des fondamentaux‐versus‐croyances et sentiments dans l’explication des mouvements persistants dans la production des pays. Il appert que les contributions des dimensions globales et nationales sont également importantes à travers le G7, même si des différences considérables existent entre pays. L’incertitude, et particulièrement l’incertitude entre pays, est importante dans le processus de propagation des effets des chocs, et génère environ 20 % en moyenne des mouvements de production persistants des pays. Les fondamentaux dominent les mouvements de la production, mais avec un rapport 80–20, le sentiment joue un rôle non‐négligeable.
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ItemDoes one size fit all? Modelling macroeconomic linkages in the West African Economic and Monetary Union(SPRINGER, 2012-02-01)We construct a structural macroeconometric model for member states of the West African Economic and Monetary Union (UEMOA). Fitting this model to annual and quarterly time-series data allows us to identify the channels through which macroeconomic innovations in one country impact on other countries in the union. We also discover the extent of heterogeneity across the member states in terms of the degree of similarity of macroeconomic transmission mechanisms. This is one important element in measuring the costs of union membership for each country.
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ItemMaking Fiscal Adjustments Using Event Probability Forecasts in OECD Countries(Wiley, 2020-09-01)This paper describes an approach to making fiscal policy decisions based on probabilistic statements on the likely occurrence of events as specified in a rules‐based framework for making fiscal adjustments. The event probability forecasts are obtained from a simple time series econometric model of the key variables influencing debt dynamics (interest rates, output and debt itself). The approach is applied to data for ten developed countries for 1956–2016 and the analysis demonstrates the importance of accommodating international linkages in forecasting, noting that failure to do so would have led to excessive fiscal cutbacks and austerity in recent years.
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ItemThe Australian Real-Time Fiscal Database: An Overview with Illustrations of Its Use in Analysing Fiscal Policy(Wiley, 2020-03-01)This paper describes a fiscal database for Australia including measures of government spending, revenue, deficits, debt and various sub‐aggregates as initially published and subsequently revised. The data vintages are collated from various sources and provide a comprehensive description of the Australian fiscal environment as experienced in real time. Methods are described which exploit the richness of the real‐time data sets, and they are illustrated through an analysis of the extent to which stated fiscal plans are realised in practice and through the estimation of fiscal multipliers which draw a distinction between policy responses and policy initiatives. We find predictable differences between plans and actual fiscal policy and a larger multiplier for policy initiatives than for implementation errors.
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ItemEvaluating the use of realtime data in forecasting output levels and recessionary events in the USA(Wiley, 2019-01-01)The paper proposes a modelling framework and evaluation procedure to judge the usefulness of realtime data sets incorporating past data vintages and survey expectations in forecasting. The analysis is based on ‘metamodels’ obtained by using model averaging techniques and judged by various statistical and economic criteria, including a novel criterion based on a fair bet. Analysing US output data over 1968, quarter 4–2015, quarter 1, we find that both elements of the realtime data are useful with their contributions varying over time. Revisions data are particularly valuable for point and density forecasts of growth but survey expectations are important in forecasting rare recessionary events.
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ItemAn Introduction to Data Cleaning Using Internet Search Data(John Wiley & Sons, 2017-09)This article considers the issue of data cleaning. We use state‐level data on internet search activity in the United States to illustrate several common data cleaning tasks, including frequency conversion and data scaling as well as methods for handling sampling uncertainty and accommodating structural breaks and outliers. We emphasise that data cleaning relies on informed judgement and so it is important to maintain transparency through careful documentation of data cleaning procedures.
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ItemInformation rigidities and the news-adjusted output gap(Elsevier, 2016)A vector-autoregressive model of actual output and expected output obtained from surveys is used to test for information rigidities and to provide a characterisation of output dynamics that accommodates these information structures. News on actual and expected outputs is decomposed to identify innovations understood to have short-lived effects and these are used with the model to derive a ‘news-adjusted output gap׳ measure. The approach is applied to US data over 1970q1–2014q2 and the new gap measure is shown to provide a good leading indicator of inflation.
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ItemTime Variation and Asymmetry in the World Price of Covariance Risk: The Implications for International Diversification( 2004-06)The International Capital Asset Pricing Model measures countryrisk in terms of the conditional covariance of national returns withthe world return. Using impulse responses from a multivariate nonlinearmodel we provide evidence of time variation and asymmetry inthe measure of country risk. and the implied benefit to internationaldiversification. The evidence implies that the price of risk and the benefitsfrom diversification may differ in a statistically and economicallymeaningful fashion across bull and bear markets.
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ItemOvercoming measurement error problems in the use of survey data on expectations(BLACKWELL PUBLISHING, 2007-09-01)