Indeterminacy and Forecastability *
| Title: | Indeterminacy and Forecastability * |
|---|---|
| Authors: | Yasuo Hirose; Jel Codes C |
| Contributors: | The Pennsylvania State University CiteSeerX Archives |
| Source: | http://www.dallasfed.org/assets/documents/institute/wpapers/2011/0091.pdf. |
| Publication Year: | 2011 |
| Collection: | CiteSeerX |
| Description: | Recent studies document the deteriorating performance of forecasting models during the Great Moderation. This conversely implies that forecastability is higher in the preceding era, when the economy was unexpectedly volatile. We offer an explanation for this phenomenon in the context of equilibrium indeterminacy in dynamic stochastic general equilibrium models. First, we analytically show that a model under indeterminacy exhibits richer dynamics that can improve forecastability. Then, using a prototypical New Keynesian model, we numerically demonstrate that indeterminacy due to passive monetary policy can yield superior forecastability as long as the degree of uncertainty about sunspot fluctuations is relatively small. |
| Document Type: | text |
| File Description: | application/pdf |
| Language: | English |
| Relation: | http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.405.5307; http://www.dallasfed.org/assets/documents/institute/wpapers/2011/0091.pdf |
| Availability: | http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.405.5307; http://www.dallasfed.org/assets/documents/institute/wpapers/2011/0091.pdf |
| Rights: | Metadata may be used without restrictions as long as the oai identifier remains attached to it. |
| Accession Number: | edsbas.D03FAC67 |
| Database: | BASE |