Factor Models

Revisiting Useful Approaches to Data-Rich Macroeconomic Forecasting

In this paper it is shown theoretically and in simulations that under a variety of different unobserved factor structures, Partial Least Squares (PLS) and Bayesian regressions provide a better fit for a target variable relative to Principal Components (PC) regrssion. Empirically, PLS and Bayesian regressions usually have better out-of-sample performances than PC regression. Published in Computational Statistics & Data Analysis, 2016.

Creating a History of U.S. Inflation Expectations

We propose a solution to the lack of a long history of U.S. TIPS rates by using the relationship between TIPS yields and other data with a longer history to construct synthetic TIPS rates going back to 1971. Published on Liberty Street Economics, August 21 2013.

A New Approach for Identifying Demand and Supply Shocks in the Oil Market

In this post, we describe an approach for decomposing oil price changes into supply and demand shocks using financial market data. Published on Liberty Street Economics, March 25 2013.

Model Selection Criteria for Factor-Augmented Regressions

We modify standard model selection criteria, by incorporating factor estimation error, in order to make them applicable for determining appropriate factor-augmented regressions. Published in the Oxford Bulletin of Economics and Statistics, 2013.

An Examination of U.S. Dollar Declines

In this post, we examine the role of market uncertainty and currency risk premia in the pace and size of episodes of dollar weakness since 1991. Published on Liberty Street Economics, September 26 2011.

How Easy Is It to Forecast Commodity Prices?

In this post, we consider different strategies to forecast near-term commodity price inflation, but find that no particular approach is systematically more accurate and robust. Published on Liberty Street Economics, June 27 2011.

Commodity Prices, Commodity Currencies, and Global Economic Developments

In this paper we seek to produce forecasts of commodity price movements that can systematically improve on naive statistical benchmarks, including factor-augmented models, and revisit the forecasting performance of changes in commodity currencies as efficient predictors of commodity prices. Published in NBER East Asia Seminar on Economics: Commodity Prices and Markets, 2011.

Parsimonious Instrumental Variable Estimation with Many Instruments

This paper suggests a way to perform parsimonious instrumental variables estimation in the presence of many, and potentially weak, instruments, which yields consistent estimates when the set of instrumental variables complies with a strong, weak or nonexistent factor structure.