Real-time forecasting of German GDP based on a large factor model with monthly and quarterly data

This paper discusses a factor model for short-term forecasting of GDP growth using a large number of monthly and quarterly time series in real-time. To take into account the different periodicities of the data and missing observations at the end of the sample, the factors are estimated by applying an EM algorithm, combined with a principal components estimator. We discuss some in-sample properties of the estimator in a real-time environment and propose alternative methods for forecasting quarterly GDP with monthly factors. In the empirical application, we use a novel real-time dataset for the German economy. Employing a recursive forecast experiment, we evaluate the forecast accuracy of the factor model with respect to German GDP. Furthermore, we investigate the role of revisions in forecast accuracy and assess the contribution of timely monthly observations to the forecast performance. Finally, we compare the performance of the mixed-frequency model with that of a factor model, based on time-aggregated quarterly data.     

WICKEDNESS IN SOCIAL CHOICE

In an article from 1973, Rittel and Webber distinguished between ‘tame’ or ‘benign’ problems on the one hand and ‘wicked’ problems on the other. The authors argued that wicked problems occur in nearly all public policy issues. Since different groups adhere to different value-sets, solutions can only be expressed as better or worse. By no means can they be viewed as definitive or objective. In this paper we consider, from this very angle, the theory of social choice which is about the aggregation of individual preferences with the aim to derive a consistent social preference. We show that collective choice offers wicked problems of various types which differ in their degree of severity. We hereby concentrate on welfare functions and voting schemes of different kinds and discuss these in the light of various criteria such as Arrow's independence condition, Condorcet consistency, monotonicity, manipulability, and other properties.     

Effort maximization in asymmetric contest games with heterogeneous contestants

Contest rules are set up by administrators who frequently have discretionary power in specifying the details of these rules, i.e., they can bias the contest rules toward specific contestants in order to further their prime objective. We derive the optimal bias of the contest rule for a contest administrator, who is interested in maximizing the total efforts expended in the contest. The solution is obtained in closed form for a widely used class of n-person contest games. Setting the optimal bias has important implications: (i) there is never exclusion of strong players, instead there is (endogenously induced) inclusion of weak contestants; (ii) the contest administrator will optimally level the playing field by encouraging weak contestants, but he will not equalize the contestants’ chances unless they are identical; and (iii) at least three contestants will be active in equilibrium of the optimal contest, irrespective of heterogeneity.     

Time-Varying Leverage and Basel III: A Look at Canadian Evidence

Why did the conventional leverage indicators not pick up any meaningful signal of the mounting systemic risk before the subprime crisis? They remained almost unchanged in recent decades, whereas the banking landscape underwent a tremendous metamorphosis. Market-oriented banking is characterized by a new type of systemic risk, a risk which essentially evolves off the radar screen, i.e., off-balance sheet (OBS) (Calmès and Théoret Journal of Banking and Finance 34 (7): 1719–1728, 2010, 2011). In this article, we argue that the standard leverage indicators are not fitted to capture this kind of new banking risk. We introduce a new empirical framework which enables us to exploit the cyclical properties of elasticity leverage measures, while at the same time controlling for the noisy information they usually deliver. In a nutshell, thanks to the Kalman filter, we are able to compute optimal levels of bank leverage. This methodology delivers cyclical, forward-looking measures signalling systemic risk bubbles years before their burst. By properly accounting for all activities, including market-oriented banking, these time-varying leverage measures tend to systemically capture regulatory capital arbitrage and the OBS risk it entails.     

Oil price forecasting under asymmetric loss

Based on the approach developed by Elliott et al. (2005), we found that the loss function of a sample of oil price forecasters is asymmetric in the forecast error. Our findings indicate that the loss oil price forecasters incurred when their forecasts exceeded the price of oil tended to be larger than the loss they incurred when their forecast fell short of the price of oil. Accounting for the asymmetry of the loss function does not necessarily make forecasts look rational.     

The framing of product ideas in the making: a case study of the development of an energy saving pump

Research regarding work with ideas in industrial settings has predominantly treated ideas as rather stable ‘black boxes’. This article contributes a new understanding of idea work and seeks to expand our understanding of how a product concept is constituted and synthesised through socio-material interaction of organisational members and engagement in idea work. The article contributes a case study of the development process behind the energy-saving Alpha Pro circulator launched by the Danish pump manufacturer Grundfos. Based on an analysis of how organisational players engage in the controversial and shifting understandings of what seems to constitute a successful product, the article offers a new perspective on navigating the players’ ideas in the political processes of innovation. It suggests that navigation of technological frames can offer a new perspective to make explicit the implicated actors’ world views, including what they perceive as relevant problems and related strategies for solving them.     

Product development as reading and writing doings within sociotechnical practices: the reciprocity between engineers and artefacts

This ethnographic study aims at understanding how product development of wind turbine controls unfolds as ongoing engineer-artefact reciprocity. We adopt a Deweyan constructionist and Science-Technology-Society approach to contribute to product development and sociomaterial studies by emphasising the role of reciprocity between engineers' experience and artefacts through reading and writing doings. Reading doings involve texts such as specifications, minutes, sketches and components. Writing doings create/modify the same type of texts. In one project, convergent reciprocity enabled the development. Another project's development was blocked, restarted and completed internally at the producer. Enablers included repositioning of working practices, application of various artefacts/tools, heterogeneous engineers and creation of common ground. Constraints involved lack of openness, too malleable artefacts, no common ground and radical change of the development trajectory. The engineers' learning depends on these constraints and enablers. Three types of reciprocity occur: convergent, faded away and blocked.     

Gambling in contests

This paper presents a strategic model of risk-taking behavior in contests. Formally, we analyze an n-player winner-take-all contest in which each player decides when to stop a privately observed Brownian motion with drift. A player whose process reaches zero has to stop. The player with the highest stopping point wins. Unlike the explicit cost for a higher stopping time in a war of attrition, here, higher stopping times are riskier, because players can go bankrupt. We derive a closed-form solution of a Nash equilibrium outcome. In equilibrium, highest expected losses occur at an intermediate negative value of the drift.     

The role of venture capitalist to enhance the growth of Spanish and Italian university spin-offs

The establishment of spin-offs to commercialise university knowledge/technology is a potential mechanism to promote economic and innovative development. Nevertheless, University Spin-Offs (USOs) are usually resource-constrained, especially in obtaining funding, limiting their growth. Venture Capital (VC) investors play an important role in the financing and the improvement of their managerial skills, which are critical for firm growth. This paper aims to explore both the effect of VC partners on the USOs’ growth and the cross-national differences in the role played by them. To study both issues, we empirically analysed 516 Spanish and 904 Italian USOs created by 50 Spanish and 57 Italian universities, respectively, and observed them between 2005 and 2013. The results showed different effects in the Spanish and Italian cases. While in Spain the presence of VC partners positively affects the USOs’ growth, in Italy there is not a significant effect. This evidence calls for systematic policies by public administrations and universities to foster USO growth.