Home About us Contact
|
Home About us Contact | ||
|
|
||
Empirical Results (empirical + result)
Terms modified by Empirical Results Selected AbstractsMICRO EMPIRICAL RESULTS OF A KALECKIAN-TYPE CAPITAL ACCUMULATION MODEL COMPARED WITH MACRO RESULTS FOR SOME EUROPEAN ECONOMIESMETROECONOMICA, Issue 2 2008James P. Gander ABSTRACT A micro economic model of the rate of capital accumulation that corresponds to a macro Kaleckian-type post-Keynesian investment function is hypothesized. Firm-level accounting data on industrial and commercial firms over the time period 1994,2000 for three European economies and the USA are used to test the consistency of the micro model with the macro model of Hein and Ochsen (2003, Metroeconomica, 54, pp. 404,33). The micro empirical results were very consistent with the macro results, suggesting a strong micro foundation to the macro investment function. In addition country differences and industry differences were included in the analysis. [source] Downward Wage Rigidity in Europe: A New Flexible Parametric Approach and Empirical ResultsGERMAN ECONOMIC REVIEW, Issue 2 2010Andreas Behr Wage rigidity; ECHP; Sticky prices Abstract. We suggest a new parametric approach to estimate the extent of downward nominal wage rigidity in ten European countries between 1995 and 2001. The database used throughout is the User Data Base of the European Community Household Panel (ECHP). The proposed approach is based on the generalized hyperbolic distribution, which allows to model wage change distributions characterized by thick tales, skewness and leptokurtosis. Significant downward nominal wage rigidity is found in all countries under analysis, but the extent varies considerably across countries. Yearly estimates reveal increasing rigidity in Italy, Greece and Portugal, while rigidity is declining in Denmark and Belgium. The results imply that the costs of price stability differ substantially across Europe. [source] Investment and Finance in de novo private firms: Empirical Results from the Czech Republic, Hungary and PolandTHE ECONOMICS OF TRANSITION, Issue 1 2000Andrzej Bratkowski In this paper we use a survey of 281 Czech, Hungarian and Polish newly-established small private firms in order to shed some light on the constraints these firms face in the credit market. The results of our survey show that imperfections in capital markets in Central European economies do not seem to actually inhibit the growth of new private firms. Credit markets do exist for de novo private firms in the three Central European transition economies studied, and they provide quite a large amount of financing from an early stage of the existence of firms. Financial intermediation works reasonably well as far as de novo private firms are concerned: loss-making de novo firms have a lower probability of getting credit than profitable ones. Banks protect themselves against the risk of a deteriorating pool of borrowers by requiring collateral for their loans. We do not find convincing evidence concerning the existence of adverse selection. Loss-making firms are not ready to pay higher interest rates than profitable firms and are not more likely to ask for credit than profitable firms. [source] World Income Distribution and Tax Reform: What Tax Systems Do Low-Income Countries Need?DEVELOPMENT POLICY REVIEW, Issue 3 2003J. Ram Pillarisetti This article develops a new method for assessing relative direct tax burdens across all countries, treating the world as a single economic entity and assuming identical preferences across countries. Empirical results show that the new direct tax burden indices are significantly high in low-income countries in comparison with middle- and high-income countries. This article argues in favour of narrowing the base of income and capital gains tax in low-income countries and a long-term convergence of the tax burden levels across countries. Future research into tax reforms in low-income countries should focus simultaneously on economic growth, quality of life and the natural environment. [source] Formal and Informal Risk Sharing in LDCs: Theory and Empirical EvidenceECONOMETRICA, Issue 4 2008Pierre Dubois We develop and estimate a model of dynamic interactions in which commitment is limited and contracts are incomplete to explain the patterns of income and consumption growth in village economies of less developed countries. Households can insure each other through both formal contracts and informal agreements, that is, self-enforcing agreements specifying voluntary transfers. This theoretical setting nests the case of complete markets and the case where only informal agreements are available. We derive a system of nonlinear equations for income and consumption growth. A key prediction of our model is that both variables are affected by lagged consumption as a consequence of the interplay of formal and informal contracting possibilities. In a semiparametric setting, we prove identification, derive testable restrictions, and estimate the model with the use of data from Pakistani villages. Empirical results are consistent with the economic arguments. Incentive constraints due to self-enforcement bind with positive probability and formal contracts are used to reduce this probability. [source] Estimating the Fractional Order of Integration of Yields in the Brazilian Fixed Income MarketECONOMIC NOTES, Issue 3 2007Benjamin M. Tabak This paper presents evidence that yields on the Brazilian fixed income market are fractionally integrated, and compares the period before and after the implementation of the Inflation Targeting (IT) regime. The paper employs the commonly used GPH estimator and recently developed wavelets-based estimator of long memory. Empirical results suggest that interest rates are fractionally integrated and that interest rate spreads are fractionally integrated, with a higher order of integration in the period after the implementation of the IT regime. These results have important implications for the development of macroeconomic models for the Brazilian economy and for long-term forecasting. Furthermore, they imply that shocks to interest rates are long-lived. [source] Interest Rates, Stock Returns and Credit Spreads: Evidence from German EurobondsECONOMIC NOTES, Issue 1 2005Niklas Wagner We investigate daily variations in credit spreads on investment-grade Deutschemark-denominated Eurobonds during the challenging 1994,1998 period. Empirical results from a Longstaff and Schwartz (1995) two-factor regression, extended for correlated spread changes and heteroskedasticity, indicate strong persistence in spread changes. Consistent with theory and previous findings, changes in spreads are significantly negatively related to the term-structure level while, contrary to theory, the proxy for asset value does not yield a significant negative contribution. We even find a significant positive relation for Eurobonds with long maturity. Tentative interpretations are portfolio-rebalancing activities or differing risk factor sensitivities on short- vs. long-maturity bonds. [source] Campaign Contributions and Agricultural SubsidiesECONOMICS & POLITICS, Issue 3 2001Rigoberto A. Lopez This article examines the influence of campaign contributions on agricultural subsidies. Empirical results revealed that rent-seeking works, i.e. contributions, influence agricultural subsidies in the manner they best serve contributors' economic interests. Eliminating campaign contributions would significantly decrease agricultural subsidies, hurt farm groups, benefit consumers and taxpayers, and increase social welfare by approximately $5.5 billion. Although contributions are not the only determinants of agricultural subsidies, investment returns to farm PAC contributors are quite high ($1 in contributions brings about $2,000 in policy transfers). In fact, the results are in sharp contrast to the "truthful contributions" assumption of the Grossman,Helpman model. [source] Genetically Engineered: Why Some Venture Capital Firms Are More Successful Than OthersENTREPRENEURSHIP THEORY AND PRACTICE, Issue 1 2009Jennifer M. Walske While venture capital has received a tremendous amount of attention, prior research has predominantly looked at venture capital firms (VCFs) post raising their first fund. In this paper, we move the point of analysis back further and ask what type of founding team experience best predicts VCF success, controlling for firm strategy, firm size, and the environment upon which the firm was born. Empirical results show that venture capital, senior management, and consulting experience aids VCF success, while entrepreneurial experience impedes it. None of the control variables affect a VCF's ability to raise subsequent funds. [source] What Explains the Bid-Ask Spread Decline after Nasdaq Reforms?FINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 5 2003By Yan He This paper examines whether the decrease in bid-ask spreads on Nasdaq after the 1997 reforms is due to a decrease in market-making costs and/or an increase in market competition for order flows. Unlike previous studies, we jointly examine how competition and trading costs affect bid-ask spreads. In addition, we separate the effects of informed trading and liquidity costs on bid-ask spreads. Informed trading cost is directly estimated for each Nasdaq stock using a Bayesian theoretic model. Empirical results show that market-making costs and competition significantly affect bid-ask spreads. The post-reform decrease in bid-ask spreads is largely due to both an increase in competition and a decrease in informed trading and liquidity costs on Nasdaq. [source] Dispersion of Nodes Added to a NetworkGEOGRAPHICAL ANALYSIS, Issue 4 2005Michael Kuby For location problems in which optimal locations can be at nodes or along arcs but no finite dominating set has been identified, researchers may desire a method for dispersing p additional discrete candidate sites along the m arcs of a network. This article develops and tests minimax and maximin models for solving this continuous network location problem, which we call the added-node dispersion problem (ANDP). Adding nodes to an arc subdivides it into subarcs. The minimax model minimizes the maximum subarc length, while the maximin model maximizes the minimum subarc length. Like most worst-case objectives, the minimax and maximin objectives are plagued by poorly behaved alternate optima. Therefore, a secondary MinSumMax objective is used to select the best-dispersed alternate optima. We prove that equal spacing of added nodes along arcs is optimal to the MinSumMax objective. Using this fact we develop greedy heuristic algorithms that are simple, optimal, and efficient (O(mp)). Empirical results show how the maximum subarc, minimum subarc, and sum of longest subarcs change as the number of added nodes increases. Further empirical results show how using the ANDP to locate additional nodes can improve the solutions of another location problem. Using the p-dispersion problem as a case study, we show how much adding ANDP sites to the network vertices improves the p-dispersion objective function compared with (a) network vertices only and (b) vertices plus randomly added nodes. The ANDP can also be used by itself to disperse facilities such as stores, refueling stations, cell phone towers, or relay facilities along the arcs of a network, assuming that such facilities already exist at all nodes of the network. [source] Maquiladora Employment Dynamics in Nuevo LaredoGROWTH AND CHANGE, Issue 1 2007JESÚS CAÑAS ABSTRACT The Nuevo Laredo maquiladora sector has grown enormously during the last two decades. The short-term time series characteristics of this portion of the regional economy are analyzed in an attempt to quantify the trends underlying this remarkable performance. Parameter estimation is accomplished via linear transfer function (LTF) analysis. Data are drawn from the January 1990,December 2000 sample period. Empirical results indicate that real wage rates, maquiladora plants, U.S. industrial activity, and the real exchange rate of the peso play significant roles in determining month-to-month fluctuations in maquiladora employment. Furthermore, sub-sample forecast simulation exercises are conducted as an additional means for verifying model reliability. Empirical results indicate that the forecasts generated with the LTF model are less accurate than those associated with a simple random walk procedure for twelve separate step-length periods. [source] "Moderate" Environmental Amenities and Economic Change: The Nonmetropolitan Northern Forest of the Northeast U.S., 1970-2000GROWTH AND CHANGE, Issue 1 2004Kristopher D. White ABSTRACT Population, employment, and income changes in a region comprised of eighteen nonmetropolitan counties of Maine, New Hampshire, Vermont, and New York are described using Bureau of Economic Analysis data covering 1970 to 2000. Changes at the county level are examined as net differences using pooled cross-section time series analysis. The specific focus of the empirical analysis is the effect that environmental amenities have in population and economic change. Empirical results indicate that a county's relative endowment of environmental amenities has positive economic change effects, but only when the county is relatively accessible as well. Further, the environmental amenity effects vary in their temporal consistency, even when accessibility is taken into account. In general, however, the reported results support the proposition that even relatively moderate environmental amenities can hold positive effects for economic change. [source] Local Industry Agglomeration and New Business ActivityGROWTH AND CHANGE, Issue 1 2003Todd Gabe New businesses are highly involved in innovative activity, which enhances worker productivity and leads to increased economic output. This paper investigates the effects of industry concentration on the incidence of new business openings in the 5,504 Maine county-industries. Empirical findings indicate that new business activity increases with the number of incumbent establishments in a county-industry and its concentration level relative to the U.S. economy. Model simulations show that raising county-industries, with no initial industry presence, to concentration levels similar to that of the industry in the U.S. economy results in a 1.7 to 8.9 percent increase in the expected number of business openings over a three-year period. Empirical results also suggest that industry clusters comprised of young and small establishments are more conducive to new business formation than clusters made up of mature and large companies. [source] The Impact of Airport Noise and Proximity on Residential Property ValuesGROWTH AND CHANGE, Issue 3 2000Molly Espey The hedonic price method is used to estimate the relationship between residential property values and airport noise and proximity to the airport in the Reno-Sparks area. Empirical results suggest there is a statistically significant negative relationship between airport noise and residential property values, with the average home in areas where noise levels are 65 decibels or high selling for about $2400 less than equivalent homes in quieter areas. However, in direct contrast to the study by Tomkins et al.(1998) who found proximity to the Manchester airport to be an amenity, this study finds proximity to the Reno-Sparks airport to have a significant negative value. [source] Determinants of influenza vaccination timingHEALTH ECONOMICS, Issue 8 2005Byung Kwang Yoo Abstract New guidelines recommend different influenza vaccination timing for different subpopulations due to the limited availability of flu shots (FS). This study's objectives are to develop a theoretical model to demonstrate why some individuals choose to receive an early FS while others choose a late FS and to empirically explore the determinants of vaccination timing. Empirical results generally supported the theoretical results. Individuals vary their FS timing in response to variations in perceived risks, chronic condition levels reflecting their risk of influenza infection, and opportunity costs, measured by the presence of medical care other than an FS. Copyright © 2005 John Wiley & Sons, Ltd. [source] Nonlinear dynamics, complex systems, and occupational accidentsHUMAN FACTORS AND ERGONOMICS IN MANUFACTURING & SERVICE INDUSTRIES, Issue 4 2003Stephen J. Guastello This article explains how some concepts of nonlinear dynamics,attractors, bifurcations, catastrophes, chaos, and self-organization,contribute to the explanation of deterministic processes in occupational accidents. Empirical results from factory, transportation, and health care settings are compared. The complex dynamics of chaos and self-organization have recently become more important as work systems themselves have become more complex. © 2003 Wiley Periodicals, Inc. Hum Factors Man 13: 293,304, 2003. [source] HR practices perceptions, emotional exhaustion, and work outcomes: A conservation-of-resources theory in the Chinese contextHUMAN RESOURCE DEVELOPMENT QUARTERLY, Issue 1 2008Li-Yun Sun The conservation-of-resources theory provided the theoretical underpinning for the relationship among HR practices perceived by employees, emotional exhaustion, and work outcomes ( job satisfaction and job performance). To fully understand the underlying mechanism of the relationship, the study examined (1) the main and interactive effects of HR practices and employee age on emotional exhaustion and (2) the mediating effect of job satisfaction on the relationship between emotional exhaustion and job performance. Data were obtained from manufacturing workers in a privately owned company in the People's Republic of China. Empirical results lent strong support for the main, moderated, and mediated effects mentioned previously. However, contrary to our hypotheses the research result indicated that the relationship between low-commitment HR practices and emotional exhaustion was stronger for older employees than for younger ones. This contrasting finding demonstrated the criticality of an organization's commitment to employees, particularly to older employees, which further supported and enriched the conservation-of-resources theory in the Chinese context. [source] Product attributes, consumer benefits and public approval of genetically modified foodsINTERNATIONAL JOURNAL OF CONSUMER STUDIES, Issue 5 2003Ferdaus Hossain Abstract The use of biotechnology in food production has generated considerable debate involving the benefits and risks associated with its use. Consumer acceptance of genetically modified foods is a critical factor that will affect the future of this technology. Using data from a national survey, this study examines how public acceptance of food biotechnology is related to consumers' socioeconomic and value attributes as well as the benefits associated with the use of this technology. Empirical results suggest that consumer acceptance of food biotechnology increases considerably when the use of this technology brings tangible benefits for the public. Consumers with different socioeconomic and demographic attributes have diverging views of food biotechnology only when its use brings specific benefits to them. When the use of genetic technology confers no additional benefit, public attitudes towards genetically modified foods are driven primarily by their scientific knowledge, views of scientists and corporations associated with biotechnology as well as public trust and confidence in government. [source] An empirical analysis of nominal rigidities and exchange rate overshooting: an intertemporal approachINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 2 2003Gonyung Park Abstract This paper develops a system of equations from a model that combines an intertemporal approach with nominal rigidities, and empirically examines for five foreign currencies if exchange rates overshoot. Exchange rate overshooting is considered as a country's idiosyncrasy that depends on characteristics of the goods produced by the country. Empirical results show that exchange rates tend to overshoot in response to the US monetary shocks and undershoot in response to foreign monetary shocks. According to the underlying framework of consumption-based intertemporal optimization, the results imply that the consumption demand is elastic for foreign goods and inelastic for the US-produced goods. Copyright © 2003 John Wiley & Sons, Ltd. [source] A novel global optimization technique for high dimensional functionsINTERNATIONAL JOURNAL OF INTELLIGENT SYSTEMS, Issue 4 2009Crina Grosan Several types of line search methods are documented in the literature and are well known for unconstraint optimization problems. This paper proposes a modified line search method, which makes use of partial derivatives and restarts the search process after a given number of iterations by modifying the boundaries based on the best solution obtained at the previous iteration (or set of iterations). Using several high-dimensional benchmark functions, we illustrate that the proposed line search restart (LSRS) approach is very suitable for high-dimensional global optimization problems. Performance of the proposed algorithm is compared with two popular global optimization approaches, namely, genetic algorithm and particle swarm optimization method. Empirical results for up to 2000 dimensions clearly illustrate that the proposed approach performs very well for the tested high-dimensional functions. © 2009 Wiley Periodicals, Inc. [source] Bilateral Import Protection, Free Trade Agreements, and Other Factors Influencing Trade Flows in Agriculture and ClothingJOURNAL OF AGRICULTURAL ECONOMICS, Issue 2 2009Thomas L. Vollrath F1; F13; F14 Abstract Many factors shape the global network of bilateral trade including fundamental forces of supply and demand factors and government policies. This study uses the generalised gravity framework to distinguish among the different drivers that either deter or aid partner trade in land-intensive agriculture and labour-intensive clothing. The dataset used in the analysis includes bilateral trade among 70 countries in 1995, 2000 and 2005. Collectively, the 70 countries account for 85% of the world's trade in agriculture and 96% of its GDP. Empirical results lend support to the Heckscher,Ohlin explanation of trade, namely that relative factor endowments motivate cross-border trade. Results also show that tariffs are not always binding and bilateral free-trade agreements more often divert rather than create trade. [source] Measuring state dependence in individual poverty histories when there is feedback to employment status and household compositionJOURNAL OF APPLIED ECONOMETRICS, Issue 7 2009Martin Biewen This paper argues that the assumption of strict exogeneity, which is usually invoked in estimating models of state dependence with unobserved heterogeneity, is violated in the poverty context as important variables determining contemporaneous poverty status, in particular employment status and household composition, are likely to be influenced by past poverty outcomes. Therefore, a model of state dependence is developed that explicitly allows for possible feedback effects from past poverty to future employment and household composition outcomes. Empirical results based on data from the German Socio-Economic Panel (GSOEP) suggest that there are indeed such feedback effects and that failure to take them into account may lead to biased estimates of the state dependence effect. Copyright © 2009 John Wiley & Sons, Ltd. [source] The Determinants of Implied Volatility: A Test Using LIFFE Option PricesJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2000L. Copeland This paper presents and tests a model of the volatility of individual companies' stocks, using implied volatilities derived from option prices. The data comes from traded options quoted on the London International Financial Futures Exchange. The model relates equity volatilities to corporate earnings announcements, interest-rate volatility and to four determining variables representing leverage, the degree of fixed-rate debt, asset duration and cash flow inflation indexation. The model predicts that equity volatility is positively related to duration and leverage and negatively related to the degree of inflation indexation and the proportion of fixed-rate debt in the capital structure. Empirical results suggest that duration, the proportion of fixed-rate debt, and leverage are significantly related to implied volatility. Regressions using all four determining variables explain approximately 30% of the cross-sectional variation in volatility. Time series tests confirm an expected drop in volatility shortly after the earnings announcement and in most cases a positive relationship between the volatility of the stock and the volatility of interest rates. [source] Demand for differentiated milk products: implications for price competitionAGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 4 2009Elena Lopez The authors apply the Berry, Levinsohn, and Pakes (1995) model to scan data from Boston supermarkets augmented with consumer characteristics data to analyze consumer choices and price competition in a differentiated fluid milk market. Milk characteristics include price, fat content, brand name, and the organic and/or lactose-free nature of the product. Empirical results show that consumer valuation of fat decreases with income, but increases with the number of children. Low-fat and specialty milks, such as organic and lactose-free milks, are preferred by high-income consumers with no children. Although all milks are price elastic at the individual brand level, the cross-price elasticities are quite low and negligible for specialty milks. Based on calculated Lerner indexes, private label milks have the highest percent markups despite their lower prices, whereas specialty milks have the lowest markups despite their higher prices, which attests to a greater degree of market power for conventional and particularly for private label milk. [JEL Classification: D12, D40, L11, L81]. © 2009 Wiley Periodicals, Inc. [source] Market integration and convergence to the law of one price in the North American onion marketsAGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 2 2008Dwi Susanto The North American agricultural markets have become much more integrated; but the level of integration varies across sectors and over time. Differential tariff phasing-out periods and remaining trade disputes are two of many factors contributing to this. This article applies panel data unit root tests to study price convergence and market integration in the North American onion markets. Commodity and variety monthly base price data for the period of 1998 to 2006 are used. Empirical results decisively suggest the existence of price convergence across markets as well as onion varieties. A two-sample period analysis shows an increase in the speed of price convergence over time, suggesting deeper market integration as NAFTA was fully implemented. Further analysis based on a two-country-market basis found that U.S.,Canadian markets have experienced deeper market integration compared with U.S.,Mexican markets as well as Canadian,Mexican markets. [EconLit citations: F150, Q170]. © 2008 Wiley Periodicals, Inc. [source] Spanish wine consumer behavior: A choice experiment approachAGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 3 2006Nadhem Mtimet Overall wine consumption in Spain is decreasing, while at the same time, designation of origin (DO) wine consumption is increasing gradually. This study examines Spanish DO wine consumer behavior by the use of a choice experiment technique. A main-effects model as well as an interaction-effects model is estimated based on four attributes: designation of origin, price, wine aging, and grape variety. Willingness-to-pay estimates, depending on the price segment, is derived for switching from one attribute level to another. Consumer segmentation is undertaken based on purchase frequencies. Market simulations are presented for consumer segments. Empirical results indicate the importance of the DO and the wine aging attributes on wine selection. The interaction-effects model shows the importance of attribute interactions on consumers' choice process. Differences as well as similarities are detected among consumer segments. [EconLit citations: D120, Q120, Q130]. © 2006 Wiley Periodicals, Inc. Agribusiness 22: 343,362, 2006. [source] Retail oligopoly power, dairy compact, and Boston milk pricesAGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 4 2005Benaissa Chidmi This paper assesses the impacts of the Northeast Dairy Compact (NEDC) and retail oligopoly power on fluid milk prices in Boston. Empirical results reveal that price increases due to oligopoly power outweighed those caused by the NEDC by nearly seven times. In fact, markups are estimated at approximately 25% of the retail milk price, translating into approximately a little less than $0.75/gallon. We also estimated that only around two-thirds of the raw milk price changes were passed forward to consumers. This helps explain why consumer prices have come down only little after elimination of the NEDC. In fact, the new milk income-loss contract program, which basically provides partial price subsidies to farmers, has contributed to low raw milk prices that have generated substantial benefits to milk processors and retailers, modest benefits to farmers and consumers, all at the expense of taxpayers. [JEL classification: L66, L11, L13]. © 2005 Wiley Periodicals, Inc. Agribusiness 21: 477,491, 2005. [source] Forecasting volatility with support vector machine-based GARCH modelJOURNAL OF FORECASTING, Issue 4 2010Shiyi Chen Abstract Recently, support vector machine (SVM), a novel artificial neural network (ANN), has been successfully used for financial forecasting. This paper deals with the application of SVM in volatility forecasting under the GARCH framework, the performance of which is compared with simple moving average, standard GARCH, nonlinear EGARCH and traditional ANN-GARCH models by using two evaluation measures and robust Diebold,Mariano tests. The real data used in this study are daily GBP exchange rates and NYSE composite index. Empirical results from both simulation and real data reveal that, under a recursive forecasting scheme, SVM-GARCH models significantly outperform the competing models in most situations of one-period-ahead volatility forecasting, which confirms the theoretical advantage of SVM. The standard GARCH model also performs well in the case of normality and large sample size, while EGARCH model is good at forecasting volatility under the high skewed distribution. The sensitivity analysis to choose SVM parameters and cross-validation to determine the stopping point of the recurrent SVM procedure are also examined in this study. Copyright © 2009 John Wiley & Sons, Ltd. [source] Forecasting euro area inflation using dynamic factor measures of underlying inflationJOURNAL OF FORECASTING, Issue 7 2005Gonzalo Camba-Mendez Abstract Standard measures of prices are often contaminated by transitory shocks. This has prompted economists to suggest the use of measures of underlying inflation to formulate monetary policy and assist in forecasting observed inflation. Recent work has concentrated on modelling large data sets using factor models. In this paper we estimate factors from data sets of disaggregated price indices for European countries. We then assess the forecasting ability of these factor estimates against other measures of underlying inflation built from more traditional methods. The power to forecast headline inflation over horizons of 12 to 18 months is adopted as a valid criterion to assess forecasting. Empirical results for the five largest euro area countries, as well as for the euro area itself, are presented. Copyright © 2005 John Wiley & Sons, Ltd. [source] | ||||||||||||||||||||||||||||||||||||||||||||||||||||