We estimate the political economy determinants of budget deficit forecast errors. Since the adoption of the Stability Pact, Eurozone governments have manipulated forecasts before elections. The political orientation and the institutional design of governments also affects the quality of forecasts. JEL classifications: H62, H87, C23, C53, E62

We examine how machine learning (ML) predictions of high-growth enterprises (HGEs) help a budget-constrained venture capitalist source investments for fixed size portfolio. Applying design science approach, we predict HGEs 3 years ahead and focus on decision (not statistical) errors, using an accuracy measure relevant to the decision-making context. find that when ML procedure adheres budget co...

Abeysinghe (Economic Letters, 1991, 36, 175-197; Journal of Econometrics, 1994, forthcoming) showed that seasonal dummies in regressions may lead to spurious inference. This paper evaluates the post-sample forecasting performance of a seasonal-dummy ARIMA model with four other models. The results, in general, do not stand in favor of the seasonal-dummy approach. JEL classification: C53

Using Monte Carlo simulations, I show that typical out-of-sample forecast exercises for stock returns are unlikely to produce any evidence of predictability, even when there is in fact predictability and the correct model is estimated. JEL classification: C15; C53; G14.

In this note we discuss the paper on exchange rate forecasting by Molodtsova and Papell (2012). In particular we discuss issues related to forecast origins and forecast horizons when higher frequency exchange rate movements are predicted using lower frequency quarterly macroaggregates. JEL Nos.: C53, C12, C52

We develop an equivalence between the equilibrium effects of incomplete information and those two behavioral distortions: myopia, or extra discounting future; anchoring current behavior to past behavior, as in models with habit persistence adjustment costs. show how these distortions depend on higher-order beliefs GE mechanisms, they can be disciplined by evidence expectations. finally illustra...

We present a novel approach to assessing the attentiveness of professional forecasters to news about the macroeconomy. We …nd evidence that professional forecasters, taken as a group, do not always update their estimates of the current state of the economy to re‡ect the latest releases of revised estimates of key data. Key words: Professional forecasters, data revisions, inattention. JEL classi...

A comparison of the point forecasts and the central tendencies of probability distributions of in‡ation and output growth of the SPF indicates that the point forecasts are sometimes optimistic relative to the probability distributions. We consider and evaluate a number of possible explanations for this …nding, including the degree of uncertainty concerning the future, computational costs, delay...

In this paper we propose a new set of multivariate stochastic models that capture time varying seasonality within the vector innovations structural time series (VISTS) framework. These models encapsulate exponential smoothing methods in a multivariate setting. The models considered are the local level, local trend and damped trend VISTS models with an additive multivariate seasonal component. W...

Our proposed local vector autoregressive (LVAR) model has timevarying parameters that allow it to be safely used in both stationary and non-stationary situations. The estimation is conducted over an interval of local homogeneity where the parameters are approximately constant. The local interval is identified in a sequential testing procedure. Numerical analysis and real data application are co...