Using migration data of a rating agency, this paper attempts to quantify the impact of macroeconomic conditions on credit-rating migrations. The migrations are modeled as a coupled Markov chain, where the macroeconomic factors are represented by unobserved tendency variables. In the simplest case, these binary random variables are static and credit-class-specific. A generalization treats tenden...

State-space models have been increasingly used to study macroeconomic and financial problems. A state-space representation consists of two equations, a measurement equation which links the observed variables to unobserved state variables and a transition equation describing the dynamics of the state variables. In this paper, we show that a classic linear-quadratic macroeconomic framework which ...

Dynamic latent factors estimated from panels of macroeconomic indicators are used to predict future NBER recession dates. Three monthly macro factors are considered: (1) a bond and exchange rates factor extracted from 22 financial time series; (2) a stock market factor extracted from 4 stock market indicators; (3) a real factor extracted from 4 macroeconomic time series. Three main results emer...

I use the adaptive elastic net in a Bayesian framework and test its forecasting performance against lasso, adaptive lasso and elastic net (all used in a Bayesian framework) in a series of simulations, as well as in an empirical exercise for macroeconomic Euro area data. The results suggest that elastic net is the best model among the four Bayesian methods considered. Adaptive lasso, on the othe...

It is rather common to have several competing forecasts for the same variable, and many methods have been suggested to pick up the best, on the basis of their past forecasting performance. As an alternative, the forecasts can be combined to obtain a pooled forecast, and several options are available to select what forecasts should be pooled, and how to determine their relative weights. In this ...

This paper explores the potential of Business Survey data for the estimation and disaggregation of macroeconomic variables at higher frequency. We propose a multivariate model which is an extension of the Stock and Watson (1991) dynamic factor model, considering more than one common factor and high-frequency cycles. The multivariate model is cast in State Space Form and the temporal aggregation...

This paper investigates the relationship between reel macroeconomic variables and stock prices in Turkey. Consumption expenditures, industrial production index, employment level and fixed investments are used as indicators of real economic activity and consumption price index as an indicator of inflation. The ARDL bounds testing is applied to the long-run relationship between the variables. Our...