In this issue we have: Regional unemployment forecasts with spatial interdependencies ; On the Importance of Verifying Forecasting Results ; Density forecast evaluation and the effect of risk-neutral central moments on the currency risk premium ; Global Temperature Trends.
|By:||Schanne, Norbert (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
Wapler, Rüdiger (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
Weyh, Antje (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
|"We forecast unemployment for the 176 German labour-market districts on a monthly basis. Because of their small size, strong spatial interdependencies exist between these regional units. To account for these as well as for the heterogeneity in the regional development over time, we apply different versions of an univariate spatial GVAR model. When comparing the forecast precision with univariate time-series methods, we find that the spatial model does indeed perform better or at least as well. Hence, the GVAR model provides an alternative or complementary approach to commonly used methods in regional forecasting which do not consider regional interdependencies." (author's abstract, IAB-Doku) ((en))|
|JEL:||C31 C53 E24 O18|
|By:||A. Talha Yalta
|By:||Csaba Csávás (Magyar Nemzeti Bank)|
|In this paper we estimate risk-neutral probability density functions from EUR/HUF currency options using the Malz (1997) method. First, we compare different option-based indicators. We present so-called 'shortcut' indicators, i.e. indicators that can be calculated directly, without the estimation of RNDs, but which show strong co-movement with the central moments of estimated densities. We also find that it is possible to construct probability-based indicators, which again exhibit strong correlation with the central moments. We present evidence that risk-neutral densities do not provide accurate forecasts for the distribution of the historical EUR/HUF exchange rate. The higher moments of risk-neutral densities are responsible for the rejection of forecasting ability. Our interpretation is that the standard deviation, the skewness and the kurtosis of the risk-neutral densities are significantly higher than the centr al moments of subjective densities. Finally, we show that the higher moments of risk-neutral densities are able to explain a significant part of the variability in the estimated risk premium. These latter results suggest that risk-neutral standard deviation and skewness can be used as proxy variables for the respective central moments of subjective densities.|
|Keywords:||currency option, implied risk-neutral density function, density forecasting, risk premium, GMM.|
|JEL:||F31 G13 C53|
|Are global temperatures on a warming trend? It is difficult to be certain about trends when there is so much variation in the data and very high correlation from year to year. We investigate the question using statistical time series methods. Our analysis shows that the upward movement over the last 130-160 years is persistent and not explained by the high correlation, so it is best described as a trend. The warming trend becomes steeper after the mid-1970s, but there is no significant evidence for a break in trend in the late 1990s. Viewed from the perspective of 30 or 50 years ago, the temperatures recorded in most of the last decade lie above the confidence band of forecasts produced by a model that does not allow for a warming trend.|
Taken from the NEP-FOR mailing list edited by Rob Hyndman.