Asset Returns Under Model Uncertainty: Evidence From the Euro Area, the US and the UK

Since the mid-1990s the growth performance of the Euro Area as a whole, despite some good individual country performances, has failed to keep pace with developments elsewhere in the EU (including the UK) and also in the US. This is especially the case for a number of the larger Euro Area economies. Despite an encouraging performance in terms of its labour input trends, there has been a significant, offsetting, deterioration in the Euro Area's underlying productivity performance. This is driven in large part, worryingly, by a marked downward shift in the growth rate of total factor productivity. Looking to the future, no significant recovery is predicted in the Euro Area's underlying economic performance over the period 2007–11. While the policy challenge is a serious one, the Euro Area as a whole can take comfort from the fact that the gains from a successful refocusing of its overall reform agenda could be considerable. For example, the progressive introduction of the five key measures linked to the Lisbon strategy (i.e. the services directive; reduction of the administrative burden; improving human capital; 3 per cent R&D target; and increases in the employment rate) could boost the Euro Area's economic and employment growth rates by more than ½ a percentage point annually for more than a decade. Such an outturn would give the Euro Area a potential growth rate of around 2½ per cent, a rate of growth which in per capita terms would be broadly comparable to that of the US over the 2007–15 time period and, on the basis of current trends and policies, slightly better than that of the UK.

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How do pandemics end? Two decades of recurrent outbreak risk following the main waves

10.21203/rs.3.rs-893004/v1 ◽

2021 ◽

Author(s):

Max Schroeder ◽

Spyridon Lazarakis ◽

Rebecca Mancy ◽

Konstantinos Angelopoulos

Keyword(s):

Model Uncertainty ◽

Mortality Rates ◽

Disease Outbreak ◽

National Data ◽

Health Records ◽

Pareto Distributions ◽

Annual Probability ◽

The Us ◽

Spanish Flu ◽

The Uk

Abstract We analyse the dynamic evolution of disease outbreak risk after the main waves of the 1918-19 “Spanish flu” pandemic in the US and in major cities in the UK, and after the 1890-91 “Russian flu” pandemic in England and Wales. We compile municipal public health records and use national data to model the stochastic process of mortality rates after the main pandemic waves as a sequence of bounded Pareto distributions with an exponentially decaying tail parameter. In all cases, we find elevated mortality risk lasting nearly two decades. An application to COVID-19 under model uncertainty shows that in 80% of model-predicted time series, the annual probability of outbreaks exceeding 500 deaths per million is above 20% for a decade, remaining above 10% for two decades.

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At a Glance …

National Institute Economic Review ◽

10.1177/002795011222000101 ◽

2012 ◽

Vol 220 ◽

pp. F2-F2

Keyword(s):

Euro Area ◽

List Type ◽

Short Term ◽

Structural Problems ◽

The Us ◽

Successful Resolution ◽

Fiscal Austerity ◽

The Uk ◽

Global Growth

Our baseline forecast is for global growth of 3.7 per cent in 2012. Growth will accelerate to 4 per cent in 2013. These forecasts are little changed from our previous forecast.As in our previous forecast, we assume a delayed but ultimately successful resolution of the Euro Area crisis. Nevertheless, we expect a mild recession in the Euro Area as a whole, as well as in the UK. Downside risks to the Euro Area remain high. Fiscal austerity will weigh on growth in the short term, while medium to long term structural problems remain unresolved.We forecast growth of about 2 per cent in the US this year, while China and India, although slowing, will continue to drive world growth.

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Evaluating Forecast Uncertainty

National Institute Economic Review ◽

10.1177/0027950107083049 ◽

2007 ◽

Vol 201 ◽

pp. 55-60 ◽

Cited By ~ 8

Author(s):

Ray Barrell ◽

Ehsan Khoman ◽

Simon Kirby

Keyword(s):

Standard Deviation ◽

Euro Area ◽

Policy Debate ◽

Forecast Uncertainty ◽

Model Based ◽

The Us ◽

History Of ◽

The Uk

The National Institute has been producing forecasts since 1958, and they are an essential part of our contribution to the policy debate in the UK and elsewhere. Model-based forecasts for the UK have been published every quarter1 since the 1970s, whilst model-based forecasts for the US and the major Europeans started only in the late 1980s. The country coverage of the European forecasts has increased over the years, and Euro Area forecasts began as soon as membership was clear. There is a long enough history of forecasting to be able to evaluate our performance, and this note extends the work reported in Pain, Riley and Weale (2001), Barrell, Kirby and Metz (2005) and Barrell and Metz (2006). The Institute forecasts for the UK are the main focus of the analysis in this note, but evaluations of the US and Euro Area forecasts produced by the Institute are also undertaken. We focus on evaluating the last forecast undertaken (at T–1) before the start of the year being forecast (at T), as they contain as much information as was possible without using any from the year being forecast. We also look at the evolution of forecasts over the two years preceding the publication of the first outturn for the year being forecast in order to gauge at which point those forecasts become efficient in that the root mean squared deviation (RMSD) of the errors is smaller than standard deviation of the series.

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The Effects of Monetary Policy on Unemployment Dynamics under Model Uncertainty - Evidence from the US and the Euro Area

SSRN Electronic Journal ◽

10.2139/ssrn.1357245 ◽

2009 ◽

Author(s):

Carlo Altavilla ◽

Matteo Ciccarelli

Keyword(s):

Monetary Policy ◽

Euro Area ◽

Model Uncertainty ◽

The Us

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Does monetary policy in advanced economies have differentiated effects on portfolio flows to emerging economies?

Journal of Research in Emerging Markets ◽

10.30585/jrems.v2i3.483 ◽

2020 ◽

Vol 2 (3) ◽

pp. 25-70

Author(s):

Marco Hernandez

Keyword(s):

Monetary Policy ◽

Euro Area ◽

Emerging Economies ◽

Foreign Portfolio Investment ◽

Portfolio Flows ◽

Advanced Economies ◽

The Us ◽

The Uk ◽

Us Monetary Policy ◽

Differentiated Effects

This work analyzes whether the monetary policy in advanced economies (the US, the euro area, and the UK) had differentiated effects on portfolio flows from these countries toward EMEs. The results show the following: First, US monetary policy had a bigger impact on bond and equity investment to EMEs than the euro area or UK monetary policy. Second, investors' response to US monetary policy was mostly homogeneous. Among EMEs regions, foreign portfolio investment to Emerging Europe and Latin America was more volatile that than to Emerging Asia, probably because other factors such as investors' preference (in the case of bond flows) or expectations of firms' profits (in the case of equity flows) could play an important role in investors' decisions. These results could be useful for policymakers from EMEs as a benchmark to anticipate differentiated effects in portfolio flows caused by advanced economies' monetary policy.

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Coordinated fiscal stimulus in the Euro Area

National Institute Economic Review ◽

10.1177/0027950109103675 ◽

2009 ◽

Vol 207 ◽

pp. 27-38 ◽

Cited By ~ 1

Keyword(s):

Euro Area ◽

Financial Services ◽

Growth Path ◽

Medium Term ◽

European Monetary ◽

Potential Growth ◽

Fiscal Stimulus ◽

The Third ◽

The Us ◽

The Uk

The Euro Area will experience a deep and relatively protracted recession. In the third quarter of 2008 Euro Area GDP fell by 0.2 per cent on a quarterly basis and we estimate that in the fourth quarter it dropped by a further 1 per cent. In 2009, the European Monetary Union is expected to suffer the sharpest downturn it has ever experienced, and it is expected to be sharper than the downturns experienced by member countries in the early 1990s and 1980s as well as the mid 1970s — see figure 17. The economy is expected to contract by 2 per cent year-on-year. In 2010 the Euro Area economy is expected to show no growth at all in annual terms, before it slowly returns to its potential growth path in the medium term. In the longer term there may be scarring from the crisis on the level of output, but we suggest that it will be noticeably less than in the UK and the US as they economies have been more dependent on financial services.

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Money demand in the euro area, the US and the UK: Assessing the role of nonlinearity

Economic Modelling ◽

10.1016/j.econmod.2013.02.009 ◽

2013 ◽

Vol 32 ◽

pp. 507-515 ◽

Cited By ~ 13

Author(s):

Fredj Jawadi ◽

Ricardo M. Sousa

Keyword(s):

Euro Area ◽

Money Demand ◽

The Us ◽

The Uk

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The World Economy

National Institute Economic Review ◽

10.1177/002795010418900103 ◽

2004 ◽

Vol 189 ◽

pp. 8-36

Keyword(s):

Euro Area ◽

Commodity Prices ◽

Output Gap ◽

Inflation Expectations ◽

Global Recession ◽

Percentage Points ◽

The Us ◽

To Come ◽

The Uk ◽

Output Gaps

Global inflationary pressures have been building over the last 12 months. These rising pressures reflect emergence from the global recession of 2001–2 and fiscal laxity in several of the world's largest economies, as well as a number of temporary factors such as rising commodity prices and indirect tax increases. Inflation expectations, as reflected by yield differences between indexed and ordinary government debt, have edged up in the US, the Euro Area and the UK, as illustrated in Chart 1. US and UK inflation expectations are about 0.8 percentage points higher than at the start of 2003, while Euro Area inflation expectations have risen by about 0.4 percentage points. Our inflation projections for the major economies are reported in Table 1. We forecast an acceleration of inflation in the US, Germany, France and the UK this year relative to 2003, and expect deflation in Japan to come to an end from the middle of 2004. Stronger inflationary pressures in the US partly reflect the positive output gap, while output gaps in Canada and the Euro Area are expected to remain negative until the end of 2005 and 2006, respectively. Our output gap estimates are illustrated in Chart 2.

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