Do professional forecasters behave as if they believed in the New Keynesian Phillips Curve for the euro area?

This paper finds that participants in the European Central Bank’s Survey of Professional Forecasters have submitted forecasts that are consistent with a (mostly forward-looking) empirical version of the New Keynesian Phillips Curve for the euro area. The estimation technique takes advantage of the panel nature of the Survey of Professional Forecasters’ dataset to exploit both its time series and cross-section dimensions, and to control for unobservable individual heterogeneity across forecasters. The estimation results suggest that euro-area inflation forecasts have reacted less to unemployment forecasts after the start of the financial crisis but another cost measure (energy inflation) remains significant. This finding is consistent with a flatter Phillips Curve in the euro area after 2007. However, the reasons suggested by the International Monetary Fund for this finding, namely a better anchoring of inflation expectations and increases in structural unemployment do not seem to find support in the survey data. Instead, the expectations for compensation per employee submitted by professional forecasters are consistent with the existence of downward real-wage rigidities in euro-area labour markets.     

The relationship between population growth and standard-of-living growth over 1870–2013: evidence from a bootstrapped panel Granger causality test

This paper examines the linkages between population growth and standard-of-living growth in 21 countries over the period of 1870–2013. We apply the bootstrap panel causality test proposed by Kónya (Econ Model 23:978–992, 2006), which accounts for both dependency and heterogeneity across countries. We find one-way Granger causality running from population growth to standard-of-living growth for Finland, France, Portugal, and Sweden, one-way Granger causality running from standard-of-living growth to population growth for Canada, Germany, Japan, Norway and Switzerland, two-way causality for Austria and Italy, and no causal relationship for Belgium, Brazil, Denmark, Netherlands, New Zealand, Spain, Sri Lanka, the UK, the USA, and Uruguay. Dividing the sample into two subsamples due to a structural break yields different results over the two periods of 1871–1951 and 1952–2013. Our empirical results suggest important policy implications for these 21 countries as the directions of causality differ across countries and time period.     

Bitcoin and entrepreneurship: breaking the network effect

This paper explores the question of whether the market process is capable of bringing about a spontaneous monetary switch to a new currency in the presence of strong network effects of the incumbent currency as well as the absence of contingencies such as extreme inflation or political instability. It does so by examining current happenings around Bitcoin. It finds that two mechanisms stand out: the coordinating efforts of the profit-maximizing entrepreneur as well as the ability to use the old and the new currency simultaneously. Specifically, it finds that marginal decisions made by rational agents merely seeking to maximize net private benefit irrespective of the network effect, be it entrepreneurs or users of the new currency, are capable of setting in motion a switch to a new currency. Whether or not these mechanisms play out fully in the case of Bitcoin still remains to be seen.     

Taxation of capital income in overlapping generations economies

Whether capital income should be taxed in overlapping generations economies is vividly discussed. It is shown that intergenerational lump‐sum taxes cannot implement the Golden Rule allocation when agents have private information on their earnings potential. Hence, the seminal Atkinson–Stiglitz result that optimal income taxation pre‐empts any role for indirect taxation cannot be interpreted to imply that capital income taxation (affecting intertemporal relative prices) should not be taxed. Specifically, capital income should unambiguously be taxed in small open economies, and the optimal tax rate depends inversely on the elasticity of total savings to disposable income and the after‐tax rate of return.     

Projecting total costs and health consequences of increasing mt-sDNA utilization for colorectal cancer screening from the payer and integrated delivery network perspectives

Abstract

Aims: To evaluate total costs and health consequences of a colorectal cancer (CRC) screening program with colonoscopy, fecal immunochemical tests (FIT), and expanded use of multitarget stool DNA (mt-sDNA) from the perspectives of Integrated Delivery Networks (IDNs) and payers in the United States.

Materials and methods: We developed a budget impact and cost-consequence model that simulates CRC screening for eligible 50- to 75-year-old adults. A status quo scenario and an increased mt-sDNA scenario were modeled. The status quo includes the current screening mix of colonoscopy (83%), FIT (11%), and mt-sDNA (6%) modalities. The increased mt-sDNA scenario increases mt-sDNA utilization to 28% over 10 years. Costs for both the IDN and the payer perspectives incorporated diagnostic and surveillance colonoscopies, adverse events (AEs), and CRC treatment. The IDN perspective included screening program costs, composed of direct nonmedical (e.g. patient navigation) and indirect (e.g. administration) costs. It was assumed that IDNs do not incur the costs for stool-based screening tests or bowel preparation for colonoscopies.

Results: In a population of one million covered lives, the 10-year incremental cost savings incurred by increasing mt-sDNA utilization was $16.2 M for the IDN and $3.3 M for the payer. The incremental savings per-person-per-month were $0.14 and $0.03 for the IDN and payer, respectively. For both perspectives, increased diagnostic colonoscopy costs were offset by reductions in screening colonoscopies, surveillance colonoscopies, and AEs. Extending screening eligibility to 45- to 75-year-olds slightly decreased the overall cost savings.

Limitations: The natural history of CRC was not simulated; however, many of the utilized parameters were extracted from highly vetted natural history models or published literature. Direct nonmedical and indirect costs for CRC screening programs are applied on a per-person-per modality basis, whereas in reality some of these costs may be fixed.

Conclusions: Increased mt-sDNA utilization leads to fewer colonoscopies, less AEs, and lower overall costs for both IDNs and payers, reducing overall screening program costs and increasing the number of cancers detected while maintaining screening adherence rates over 10 years.     

Optimal forecasts in the presence of structural breaks

This paper considers the problem of forecasting under continuous and discrete structural breaks and proposes weighting observations to obtain optimal forecasts in the MSFE sense. We derive optimal weights for one step ahead forecasts. Under continuous breaks, our approach largely recovers exponential smoothing weights. Under discrete breaks, we provide analytical expressions for optimal weights in models with a single regressor, and asymptotically valid weights for models with more than one regressor. It is shown that in these cases the optimal weight is the same across observations within a given regime and differs only across regimes. In practice, where information on structural breaks is uncertain, a forecasting procedure based on robust optimal weights is proposed. The relative performance of our proposed approach is investigated using Monte Carlo experiments and an empirical application to forecasting real GDP using the yield curve across nine industrial economies.     

Forecasting bond yields in the Brazilian fixed income market

This paper studies the predictive ability of a variety of models in forecasting the yield curve for the Brazilian fixed income market. We compare affine term structure models with a variation of the Nelson–Siegel exponential framework developed by Diebold and Li [Diebold, F., & Li, C. (2006). Forecasting the Term Structure of Government Yields. Journal of Econometrics, 130, 337–364]. Empirical results suggest that forecasts made with the latter methodology are superior, and appear to be more accurate at long horizons than other different benchmark forecasts. These results are important for policy-makers, as well as for portfolio and risk managers. Further research could study the predictive ability of such models in other emerging markets.