Forecasting UK GDP growth and inflation under structural change. A comparison of models with time-varying parameters

Evidence from a large and growing body of empirical literature strongly suggests that there have been changes in the inflation and output dynamics in the United Kingdom. The majority of these papers base their results on a class of econometric models that allows for time-variation in the coefficients and volatilities of shocks. While these models have been used extensively for studying evolving dynamics and for structural analysis, there has been little evidence that they are useful for forecasting UK output growth and inflation. This paper attempts to fill this gap by comparing the performances of a wide range of time-varying parameter models in forecasting output growth and inflation. We find that allowing for time-varying parameters can lead to large and statistically significant gains in forecast accuracy.     

Analyzing the duration of IPOs from offering to listing using the Cox proportional hazards model

Portuguese Economic Journal - This study examines the duration from the offering to the listing of IPOs issued on the Pakistan Stock Exchange (PSX) during the period lasting from 1995 to 2017....     

Higher education,employment and economic growth: Exploring the interactions

ABSTRACT

This article interrogates the impact and nature of South Africa’s post-apartheid economic growth performance through the lens of human capital investment with a particular emphasis on higher education. The South African economy has been characterised by a skills-biased trajectory, ensuring jobs for the better educated. By differentiating between tertiary and vocational training, we find that further education and training (FET) graduates are almost as likely to be employed as school leavers without higher education. We analyse the extent to which the educational attainments of labour affect the nature and trajectory of economic growth in South Africa, by estimating Olley and Pakes’ two-stage regression on a modified Cobb–Douglas production function. The results indicate that the degree cohort contributes to economic growth whilst other higher education institutions, including FET colleges, do not productively contribute to economic growth.     

Nonlinear effects of government spending shocks in the USA: Evidence from state‐level data

This paper uses state‐level data to estimate the effect of government spending shocks during expansions and recessions. By employing a mixed‐frequency framework, we are able to include a long span of annual state‐level government spending data in our nonlinear quarterly panel VAR model. We find evidence that for the average state the fiscal multiplier is larger during recessions. However, there is substantial heterogeneity across the cross‐section. The degree of nonlinearity in the effect of spending shocks is larger in states that are subject to a higher degree of financial frictions. In contrast, states with a prevalence of manufacturing, mining and agricultural industries tend to have multipliers that are more similar across business cycle phases.     

The great moderation of the term structure of UK interest rates

The conduct of monetary policy, the term structure of interest rates and the structure of the economy in the UK have changed over the post-WWII period. We model the interaction between the macroeconomy and financial markets using a time-varying VAR augmented with the factors from the yield curve. There is evidence of a great moderation in the dynamics of the yield curve, with the factors being persistent and volatile before the introduction of inflation targeting in 1992 but becoming stable afterwards. The introduction of time-variation in the Factor Augmented VAR improves the fit of the model and results in expectation hypothesis consistent yields that are close to actual yields, even at long maturities. Monetary policy shocks had a significant impact on the volatility of inflation, output and the policy rate over the pre-inflation targeting era, but their contribution has been negligible under the current regime. Shocks to the level of the yield curve accounted for a large fraction of inflation variability only before 1992.     

Estimation of the spillover effect between patents and innovation using the GARCH–BEKK model

This study examines the mean and variance spillovers between patents filed and total factor productivity in Pakistan during the period lasting from 1964 to 2015. Using the multivariate generalized autoregressive conditionally heteroskedastic–Baba, Engle, Kraft and Kroner (GARCH–BEKK) model, we find no evidence of mean spillover effects between patents filed and productivity growth. However, the results support the existence of the variance spillover effect, which illustrates that the innovations may affect productivity in the long‐run. Moreover, bidirectional causality in the mean and variance between innovation and productivity growth is non‐existent. We find that R&D/GDP, skilled labour force and economic freedom are the significant factors affecting technological advancements in the country. We also determine that R&D/GDP and economic freedom are the important factors affecting patent activities in Pakistan. Our findings suggest that the government needs to emphasize the regulations of the patent system to safeguard the interests of investors, which ultimately promotes economic growth.     

The South African social safety net: past,present and future

Discriminatory social provision in South Africa originated soon after Union. This differentiation continued in the period before Nationalist rule, but there were also attempts at liberalisation, particularly during the Second World War. Nationalist rule brought with it a reversal of what little gains may have been made. From the early 1970s there was a gradual shift away from apartheid dogma. Future policies will need to eliminate gaps in the social safety net and ensure that adequate entitlements are delivered prudently and cost‐effectively.     

Time‐Varying Dynamics of the Norwegian Economy

We use time‐varying parameter vector autoregressive models to investigate possible changes in the time‐series properties of key Norwegian macroeconomic variables since the 1980s. Notably, we find that inflation persistence falls during the inflation targeting period, while the volatility of inflation and nominal exchange rates increases. The observed time‐variation in the correlations between the interest rates and the macro variables largely reflects the prevailing monetary policy regimes. An increase in the correlations between oil prices and other macro variables over time is also documented. Using a counterfactual analysis, we discuss the observed time‐varying dynamics of the Norwegian economy in the light of monetary policy and oil price shocks.