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  • 1.
    Abrego, Lisandro
    et al.
    International Monetary Fund, Washington DC, USA.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    External Linkages and Economic Growth in Colombia: Insights from a Bayesian VAR Model2010In: The World Economy, ISSN 0378-5920, E-ISSN 1467-9701, Vol. 33, no 12, p. 1788-1810Article in journal (Refereed)
    Abstract [en]

    This paper investigates the sensitivity of Colombian GDP growth to the surrounding macroeconomic environment. We estimate a Bayesian VAR model with informative steady-state priors for the Colombian economy using quarterly data from 1995 to 2007. A variance decomposition shows that world GDP growth and government spending are the most important factors, explaining roughly 17 and 16 per cent of the variance in Colombian GDP growth respectively. The model, which is shown to forecast well out-of-sample, can also be used to analyse alternative scenarios. Generating both endogenous and conditional forecasts, we show that the impact on Colombian GDP growth of a substantial downturn in world GDP growth would be non-negligible but that the decline still would be mild by historical standards.

  • 2.
    Antipin, Jan-Erik
    et al.
    Finnish Tax Administration.
    Boumediene, Farid Jimmy
    Confederation of Swedish Enterprise, Stockholm, Sweden.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Forecasting Inflation Using Constant Gain Least Squares2014In: Australian Economic Papers, ISSN 0004-900X, E-ISSN 1467-8454, Vol. 53, no 1-2, p. 2-15Article in journal (Refereed)
    Abstract [en]

    This paper assesses the usefulness of constant gain least squares when forecasting inflation.An out-of-sample forecast exercise is conducted, in which univariate autoregressive models for inflation in Australia, Sweden, the United Kingdom and the United States are used. The results suggest that it is possible to improve the forecast accuracy by employing constant gain least squares instead of ordinary least squares. In particular, when using a gain of 0.05, constant gain least squares generally outperforms the corresponding autoregressive model estimated with ordinary least squares. In fact, at longer forecast horizons, the root mean square forecast error is reliably lowered for all four countries and for all lag lengths considered in the study.

  • 3.
    Antipin, Jan-Erik
    et al.
    Finnish Tax Administration.
    Boumediene, Farid Jimmy
    Svenskt näringsliv, Stockholm, Sweden.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    On the Usefulness of Constant Gain Least Squares when Forecasting the Unemployment Rate2014In: Applied Economics Quarterly, ISSN 1611-6607, Vol. 60, no 4, p. 315-336Article in journal (Refereed)
    Abstract [en]

    In this paper, we assess the usefulness of constant gain least squares (CGLS) when forecasting the unemployment rate. Using quarterly data from 1970 to 2009, we conduct an out-of-sample forecast exercise in which univariate autoregressive models for the unemployment rate in Australia, Sweden, the United Kingdom and the United States are employed. Results show that CGLS very rarely outperforms OLS. At horizons of six to eight quarters, OLS is always associated with higher forecast precision, regardless of model size or gain employed for Australia, Sweden and the United States. Our findings suggest that while CGLS has been shown valuable when forecasting certain macroeconomic time series, it has shortcomings when forecasting the unemployment rate. One problematic feature is found to be an increased tendency for the autoregressive model to have explosive dynamics when estimated with CGLS.

  • 4.
    Apel, Mikael
    et al.
    Sveriges riksbank, Stockholm, Sweden.
    Österholm, Pär
    Örebro University, Örebro University School of Business.
    Alltför långtgående slutsatser om implikationerna av sekulär stagnation för penningpolitiken2017In: Ekonomisk Debatt, ISSN 0345-2646, Vol. 45, no 7, p. 65-67Article in journal (Other (popular science, discussion, etc.))
  • 5.
    Assarsson, Bengt
    et al.
    National Institute of Economic Research, Stockholm, Sweden.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Do Swedish Consumer Confidence Indicators Do What They Are Intended to Do?2015In: Applied Economics Quarterly, ISSN 1611-6607, Vol. 61, no 4, p. 391-404Article in journal (Refereed)
    Abstract [en]

    In this paper, we investigate whether the two main consumer confidence indicators available for Sweden – that of the National Institute of Economic Research and that of the European Commission – can nowcast Swedish household consumption expenditure. In a simulated out-of-sample nowcast exercise, we find that the consumer confidence indicator of the National Institute of Economic Research appears most useful for this purpose. The root mean square error of the nowcast from the model employing this indicator is the lowest of all models relying on survey data. The nowcasting performance of the model using the consumer confidence indicator of the European Commission is less impressive; while it outperforms the simplest possible benchmark model, its root mean square error is considerably higher than that of the model relying on the consumer confidence indicator of the National Institute of Economic Research. An implication of our findings is that while the European Commission’s survey programme may have been successful in creating a set of harmonised data for the member countries of the European Union, it is not obvious that the harmonised indicators are the most relevant ones for analysis, nowcasting or forecasting in each country.

  • 6.
    Beechey, Meredith
    et al.
    Division of Monetary Affairs, Board of Governors of the Federal Reserve System, Washington DC, USA.
    Hjalmarsson, Erik
    Division of International Finance, Board of Governors of the Federal Reserve System, Washington DC, USA.
    Österholm, Pär
    Department of Economics, Uppsala University, Uppsala, Sweden.
    Testing the expectations hypothesis when interest rates are near integrated2009In: Journal of Banking & Finance, ISSN 0378-4266, E-ISSN 1872-6372, Vol. 33, no 5, p. 934-943Article in journal (Refereed)
    Abstract [en]

    Nominal interest rates are unlikely to be generated by unit-root processes. Using data on short and  long interest rates from eight developed and six emerging economies, we test the expectations hypothesis using cointegration methods under the assumption that interest rates are near integrated. If the null hypothesis of no cointegration is rejected, we then test whether the estimated cointegrating vector is consistent with that suggested by the expectations hypothesis. The results show support for cointegration in 10 of the 14 countries we consider, and the cointegrating vector is similar across countries. However, the parameters differ from those suggested by theory. We relate our findings to existing literature on the failure of the expectations hypothesis and to the role of term premia.

  • 7.
    Beechey, Meredith
    et al.
    Sveriges Riksbank, Stockholm, Sweden.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Central bank forecasts of policy interest rates: An evaluation of the first years2014In: Economic notes - Monte dei Paschi di Siena, ISSN 0391-5026, E-ISSN 1468-0300, Vol. 43, no 1, p. 63-78Article in journal (Refereed)
    Abstract [en]

    In recent years, the central banks of Norway and Sweden have published their endogenous policy interest‐rate forecasts. In this paper, we evaluate those forecasts alongside policy‐rate expectations inferred from market pricing. We find that for both economies, there are only small differences in relative forecasting precision between the central bank and market‐implied measures. However, both types of forecast fail tests for unbiasedness and efficiency at longer horizons.

  • 8.
    Beechey, Meredith
    et al.
    Monetary Policy Department, Sveriges Riksbank, Stockholm, Sweden.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Forecasting inflation in an inflation-targeting regime: A role for informative steady-state priors2010In: International Journal of Forecasting, ISSN 0169-2070, E-ISSN 1872-8200, Vol. 26, no 2, p. 248-264Article in journal (Refereed)
    Abstract [en]

    Inflation targeting as a monetary-policy regime is widely associated with an explicit numerical target for the rate of inflation. This paper investigates whether the forecasting performance of Bayesian autoregressive models can be improved by incorporating information about the target. We compare a mean-adjusted specification, which allows an informative prior on the distribution for the steady state of the process, to traditional methodology. We find that the out-of-sample forecasts of the mean-adjusted autoregressive model outperform those of the traditional specification, often by non-trivial amounts, for five early adopters of inflation targeting. It is also noted that as the sample lengthens, the posterior distribution of steady-state inflation narrows more for countries with explicit point targets.

  • 9.
    Beechey, Meredith
    et al.
    Sveriges Riksbank, Stockholm, Sweden.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Policy interest-rate expectations in Sweden: a forecast evaluation2014In: Applied Economics Letters, ISSN 1350-4851, E-ISSN 1466-4291, Vol. 21, no 14, p. 984-991Article in journal (Refereed)
    Abstract [en]

    In this article, we evaluate two types of Swedish policy interest-rate expectations: survey expectations and expectations inferred from market pricing. The data are drawn from the most prominent survey of financial-market economists and from Swedish financial markets, and they are carefully matched by date to ensure comparability. Results show that both kinds of expectations suffer from bias and inefficiency, and in terms of forecast precision there is no clear winner. We do find, though, evidence that the forecast accuracy of both kinds of policy-rate expectations has improved since the Riksbank started publishing its own policyrate forecast, suggesting that this communication strategy has been beneficial from a policy perspective.

  • 10.
    Beechey, Meredith
    et al.
    Division of Monetary Affairs, Board of Governors of the Federal Reserve System, Washington DC, USA.
    Österholm, Pär
    Sveriges Riksbank and Department of Economics, Uppsala University, Uppsala, Sweden.
    Revisiting the uncertain unit root in GDP and CPI: Testing for non-linear trend reversion2008In: Economics Letters, ISSN 0165-1765, E-ISSN 1873-7374, Vol. 100, no 2, p. 221-223Article in journal (Refereed)
    Abstract [en]

    We test for the presence of a unit root in U.S. GDP and CPI, allowing for non-linear trend reversion under the alternative hypothesis. In contrast to most previous results, we find evidence in favour of trend stationarity for both variables.

  • 11.
    Beechey, Meredith
    et al.
    Monetary Policy Department, Sveriges Riksbank, Stockholm, Sweden.
    Österholm, Pär
    Monetary Policy Department, Sveriges Riksbank, Stockholm, Sweden.
    The Rise and Fall of U.S. Inflation Persistence2012In: The International Journal of Central Banking, ISSN 1815-4654, E-ISSN 1815-7556, Vol. 8, no 3, p. 55-86Article in journal (Refereed)
    Abstract [en]

    We estimate the path of inflation persistence in the United States over the last 50 years using an ARMA model of inflation with time-varying autoregressive parameter. The model is motivated by the familiar New-Keynesian framework which, paired with a common model of monetary-policy optimization, predicts that the central bank’s relative preference for output stability is a determinant of inflation persistence. As such, time variation of the relative preference for output stability can generate time-varying inflation persistence. The estimated ARMA model provides an estimate of the inflation objective and the path of inflation persistence. The estimated path of inflation persistence is consistent with a general reading of Federal Reserve history; inflation persistence is estimated to have declined substantially during Volcker and Greenspan’s tenures from the high persistence of the 1970s. Interpreted in light of the theoretical framework, the results suggest that the Federal Reserve has placed increasing weight on inflation stability in recent decades.

  • 12.
    Beechey, Meredith
    et al.
    Division of Monetary Affairs, Board of Governors of the Federal Reserve System, Washington DC, USA.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Time-varying inflation persistence in the Euro area2009In: Economic Modelling, ISSN 0264-9993, E-ISSN 1873-6122, Vol. 26, no 2, p. 532-535Article in journal (Refereed)
    Abstract [en]

    This paper investigates how inflation persistence in the Euro area has evolved between 1991 and 2006. Employing an ARMA(1,11) model with time-varying autoregressive parameter, we find that inflation persistence has fallen markedly since the third stage of the EMU began in January 1999 and inflation no longer exhibits unit-root behaviour.

  • 13.
    Berger, Helge
    et al.
    International Monetary Fund, Washington DC, USA; Free University Berlin, Berlin, Germany.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Does Money Granger Cause Inflation in the Euro Area?: Evidence from Out-of-Sample Forecasts Using Bayesian VARs2011In: The Economic Record, ISSN 0013-0249, E-ISSN 1475-4932, Vol. 87, no 276, p. 45-60Article in journal (Refereed)
    Abstract [en]

    We use Bayesian estimation techniques to assess whether money growth Grangercauses inflation in the USA. We investigate the issue of Granger-causality out-of-sample and find that including money growth in simple VAR models of inflation does systematically improve out-of-sample forecasting accuracy. This holds for a long forecasting sample 1960–2005, as well for more recent subperiods, including the Volcker and Greenspan eras. However, the contribution of money to inflation forecasting accuracy is quantitatively limited and tends to be close to negligible in recent subperiods.

  • 14.
    Berger, Helge
    et al.
    International Monetary Fund, Washington DC, USA.
    Österholm, Pär
    Sveriges riksbank, Stockholm, Sweden.
    Does Money matter for U.S. Inflation?: Evidence from Bayesian VARs2011In: CESifo Economic Studies, ISSN 1610-241X, E-ISSN 1612-7501, Vol. 57, no 3, p. 531-550Article in journal (Refereed)
    Abstract [en]

    We use Bayesian estimation techniques to assess whether money growth Granger causes inflation in the USA. We investigate the issue of Granger-causality out-of-sample and find that including money growth in simple VAR models of inflation does systematically improve out-of-sample forecasting accuracy. This holds for a long forecasting sample 1960–2005, as well for more recent subperiods, including the Volcker and Greenspan eras. However, the contribution of money to inflation forecasting accuracy is quantitatively limited and tends to be close to negligible in recent subperiods.

  • 15.
    Berger, Helge
    et al.
    Free University Berlin, Economics Department, Berlin, Germany; CESifo, Germany.
    Österholm, Pär
    National Institute of Economic Resarch, Stockholm, Sweden.
    Does money still matter for U.S. output?2009In: Economics Letters, ISSN 0165-1765, E-ISSN 1873-7374, Vol. 102, no 3, p. 143-146Article in journal (Refereed)
    Abstract [en]

    In this note, we use an out-of-sample approach to investigate whether money growth Granger-causes output growth in the United States. We find that after the ‘Great moderation,’ the Granger-causal role of money appears to have vanished completely.

  • 16.
    Billstam, Maria
    et al.
    Konjunkturinstitutet, Stockholm, Sweden.
    Frändén, Kristina
    Statistiska centralbyrån, Stockholm, Sweden.
    Samuelsson, Johan
    Konjunkturinstitutet, Stockholm, Sweden.
    Österholm, Pär
    Örebro University, Örebro University School of Business.
    Quasi-Real-Time Data of the Economic Tendency Survey2017In: Journal of Business Cycle Research, ISSN 2509-7962, Vol. 13, no 1, p. 105-138Article in journal (Refereed)
    Abstract [en]

    Survey data from businesses and households are widely used for forecasting and economic analysis. In Sweden, the most important survey of this kind is the Economic Tendency Survey of the National Institute of Economic Research. A shortcoming with this survey is that real-time data of it largely are unavailable. In this paper, we describe how two quasi-real-time data sets of this survey have been constructed – one monthly and one quarterly. The term “quasi-real-time data” refers to data which are not actual real-time data but have been created in order to provide a close approximation to real-time data. The data sets consist of monthly/quarterly vintages of the most important series of the survey, including the main confidence indicators. A natural usage of these data sets is evaluations of model-based forecasts and nowcasts. We illustrate this with an application to Swedish GDP growth. This shows that several of the studied indicators from the Economic Tendency Survey appear to have positive nowcast content for GDP growth.

  • 17.
    Dale, Spencer
    et al.
    Bank of England, London, UK.
    Orphanides, Athanasios
    Central Bank of Cyprus, Nicosia, Cyprus.
    Österholm, Pär
    Sveriges riksbank, Stockholm, Sweden.
    Imperfect Central Bank Communication: Information versus Distraction2011In: The International Journal of Central Banking, ISSN 1815-4654, E-ISSN 1815-7556, Vol. 7, no 2, p. 3-39Article in journal (Refereed)
    Abstract [en]

    Much of the information communicated by central banks is noisy or imperfect. This paper considers the potential benefits and limitations of central bank communications in a model of imperfect knowledge and learning. It is shown that the value of communicating imperfect information is ambiguous. If the public is able to assess accurately the quality of the imperfect information communicated by a central bank, such communication can inform and improve the public’s decisions and expectations. But if not, communicating imperfect information has the potential to mislead and distract. The risk that imperfect communication may detract from the public’s understanding should be considered in the context of a central bank’s communications strategy. The risk of distraction means the central bank may prefer to focus its communication policies on the information it knows most about. Indeed, conveying more certain information may improve the public’s understanding to the extent that it “crowds out” a role for communicating imperfect information.

  • 18.
    Flodberg, Caroline
    et al.
    Sveriges riksbank, Stockholm, Sweden.
    Österholm, Pär
    Örebro University, Örebro University School of Business.
    A Statistical Analysis of Revisions of Swedish National Accounts Data2017In: Finnish economic papers, ISSN 0784-5197, Vol. 28, no 1, p. 10-33Article in journal (Refereed)
    Abstract [en]

    In this paper, we study revisions of Swedish national accounts data. Three aspects of the revisions are considered: volatility, unbiasedness and forecast efficiency. Our results indicate that the properties of the revisions are more problematic for the production side than for the expenditure side. The high volatility of the revisions on the production side indicates that it is generally difficult to make clear cut statements concerning production across industries within the business sector based on the initial data release; it is also likely to make forecasting more difficult.

  • 19.
    Gustafsson, Peter
    et al.
    Sveriges riksbank, Stockholm, Sweden.
    Stockhammar, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Macroeconomic effects of a decline in housing prices in Sweden2016In: Journal of Policy Modeling, ISSN 0161-8938, E-ISSN 1873-8060, Vol. 38, no 2, p. 242-255Article in journal (Refereed)
    Abstract [en]

    Real housing prices in Sweden have roughly doubled the last 15 years. The rise in housing prices has coincided with a rise in household debt, sparking debate about both the presence of financial imbalances in the Swedish economy and the macroeconomic effects that a correction of these imbalances would have. In this paper, we conduct a quantitative assessment of the macroeconomic effects of a considerable decline inhousing prices using a Bayesian VAR model. Results show that a 20% drop in housing prices would lead to a recession-like impact on household consumption and unemployment. The impact would be even greater if falling housing prices coincided with a global economic downturn. This information should be useful to policymakers. If a fall in housing prices were to materialize, more expansionary stabilization policies would be motivated in order to dampen the effects on the real economy.

  • 20.
    Gustavsson, Magnus
    et al.
    Department of Economics, Uppsala University, Uppsala Center for Labor Studies, Uppsala, Sweden.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Does the labor-income process contain a unit root?: Evidence from individual-specific time series2014In: Journal of Economic Dynamics and Control, ISSN 0165-1889, E-ISSN 1879-1743, Vol. 47, p. 152-167Article in journal (Refereed)
    Abstract [en]

    Calibrations of models related to life-cycle behavior of consumption and saving often invoke the important assumption of a unit root in individuals' labor-income process. We for the first time test this assumption using methods for univariate time series. Based on longitudinal register data from 1968 to 2005, we first estimate an autoregressive model for each individual using a method for approximately median-unbiased estimation. We then exploit the resulting distribution of the individual-specific estimates to draw inference about the presence of a unit root. Results indicate that earnings for the representative worker are governed by a process where shocks to earnings have moderate persistence and are both economically and statistically significantly different from having permanent effects. These results question the heavy use of unit-root processes for earnings.

  • 21.
    Gustavsson, Magnus
    et al.
    Department of Economics, Uppsala University, Uppsala, Sweden; Uppsala Center for Labour Studies (UCLS), Uppsala University, Uppsala, Sweden.
    Österholm, Pär
    Sveriges riksbank, Stockholm, Sweden.
    Labor-force participation rates and the informational value of unemployment rates: Evidence from disaggregated US data2012In: Economics Letters, ISSN 0165-1765, E-ISSN 1873-7374, Vol. 116, no 3, p. 408-410Article in journal (Refereed)
    Abstract [en]

    The informational value of the aggregate US unemployment rate has recently been questioned because of a unit root in the labor-force participation rate; the lack of mean reversion implies that long-run changes in unemployment rates are highly unlikely to reflect long-run changes in joblessness. This note shows that this critique also extends to unemployment rates for sub-populations, such as prime-aged males.

  • 22.
    Gustavsson, Magnus
    et al.
    Department of Economics, Uppsala University, Uppsala, Sweden.
    Österholm, Pär
    Department of Economics, Uppsala University, Uppsala, Sweden.
    The informational value of unemployment statistics: A note on the time series properties of participation rates2006In: Economics Letters, ISSN 0165-1765, E-ISSN 1873-7374, Vol. 92, no 3, p. 428-433Article in journal (Refereed)
    Abstract [en]

    Using a battery of unit root tests, we show that labor force participation rates in Australia, Canada and the U.S. are non-stationary. This implies that great care is needed before unemployment rates are used as measures of joblessness.

  • 23.
    Gustavsson, Magnus
    et al.
    Department of Economics, Uppsala University, Uppsala, Sweden.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    The presence of unemployment hysteresis in the OECD: what can we learn from out-of-sample forecasts?2010In: Empirical Economics, ISSN 0377-7332, E-ISSN 1435-8921, Vol. 38, no 3, p. 779-792Article in journal (Refereed)
    Abstract [en]

    This paper investigates the relevance of unemployment hysteresis in seventeen OECD countries. We employ an out-of-sample forecast exercise in which a mean-reverting autoregressive model is compared to an autoregressive model with an imposed unit root. A substantial difference in forecasting performance between the twomodels is established formany countries, but the results aremixed in their strength. The evidence for unemployment hysteresis in Austria, Finland, Iceland, Israel, Italy, Japan and Sweden is, however, convincing. For no country can unambiguous support for a mean reverting unemployment rate be found.

  • 24.
    Hjalmarsson, Erik
    et al.
    Department of Economics and the Centre for Finance, University of Gothenburg, Gothenburg, Sweden.
    Österholm, Pär
    Örebro University, Örebro University School of Business.
    Households’ mortgage-rate expectations – more realistic than at first glance?2017In: Penning- och valutapolitik, E-ISSN 2000-978X, no 2, p. 56-63Article in journal (Other academic)
    Abstract [en]

    Household expectations of future mortgage rates elicited over the last few years might appear unrealistically low. However, taking explicit account of the high persistence in interest rates, we find that Swedish households’ implied longterm expectation of mortgage rates is around 4.7 per cent. This number lines up well with the long-term expectation that can be deduced from the Riksbank’s assessment of the repo rate in the long run and the typical spread between the mortgage rate and the repo rate. Our analysis makes use of household mortgage-rate expectations at three different horizons, which enables an explicit modelling of the ‘term-structure’ of household forecasts.

  • 25.
    Hjalmarsson, Erik
    et al.
    Institutionen för nationalekonomi med statistik, Göteborgs universitet, Göteborg, Sverige.
    Österholm, Pär
    Örebro University, Örebro University School of Business.
    Professorer: Rörigt om nytt inflationsmål2017In: Dagens industri, ISSN 0346-640XArticle in journal (Other (popular science, discussion, etc.))
  • 26.
    Hjalmarsson, Erik
    et al.
    Institutionen för nationalekonomi med statistik, Göteborgs universitet, Göteborg, Sverige.
    Österholm, Pär
    Örebro University, Örebro University School of Business.
    Rätt av Riksbanken att bedriva expansiv politik2017In: SvD, ISSN 1101-2412, no 22 OktArticle in journal (Other (popular science, discussion, etc.))
  • 27.
    Hjalmarsson, Erik
    et al.
    Division of International Finance, Board of Governors of the Federal Reserve System, Washington DC, United States.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Testing for cointegration using the Johansen methodology when variables are near-integrated: size distortions and partial remedies2010In: Empirical Economics, ISSN 0377-7332, E-ISSN 1435-8921, Vol. 39, no 1, p. 51-76Article in journal (Refereed)
    Abstract [en]

    We investigate the properties of Johansen’s (J Econ Dyn Control 12:231–254, 1988; Econometrica 59:1551–1580, 1991) maximum eigenvalue and trace testsfor cointegration under the empirically relevant situation of near-integrated variables. Using MonteCarlo techniques, we showthat in a systemwith near-integrated variables, the probability of reaching an erroneous conclusion regarding the cointegrating rank of the system is generally substantially higher than the nominal size. The risk of concluding that completely unrelated series are cointegrated is therefore non-negligible. We suggest ways of identifying the problem and different approaches to reduce the size distortions of the tests.

  • 28.
    Hultkrantz, Lars
    et al.
    Örebro University, Örebro University School of Business.
    Österholm, PärÖrebro University, Örebro University School of Business.
    Marknad och politik2017Collection (editor) (Other academic)
  • 29.
    Jonsson, Thomas
    et al.
    National Institute of Economic Research, Stockholm, Sweden.
    Österholm, Pär
    Sveriges riksbank, Stockholm, Sweden.
    The forecasting properties of survey-based wage-growth expectations2011In: Economics Letters, ISSN 0165-1765, E-ISSN 1873-7374, Vol. 113, no 3, p. 276-281Article in journal (Refereed)
    Abstract [en]

    Weevaluate survey-based wage-growth expectations and find that they are neither unbiased nor efficient forecasts. Concerning out-of-sample forecast precision, survey participants generally perform worse than a constant forecast. Caution should accordingly be exercised when relying on these data for policymaking.

  • 30.
    Jonsson, Thomas
    et al.
    National Institute of Economic Research, Stockholm, Sweden.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    The properties of survey-based inflation expectations in Sweden2012In: Empirical Economics, ISSN 0377-7332, E-ISSN 1435-8921, Vol. 42, no 1, p. 79-94Article in journal (Refereed)
    Abstract [en]

    This article assesses the properties of survey-based inflation expectations in Sweden. The survey in question is conducted by Prospera once every quarter andconsists of respondents from businesses and labour-market organisations. The article shows that inflation expectations measured in this survey tend to be biased and inefficient forecasts of future inflation. Moreover, evaluations of forecast accuracy show that these inflation expectations are worse predictors of inflation than those of a professional forecasting institution and also typically outperformed by a simple autoregressive model. Given that the true inflation expectations are captured by the survey, our results indicate that economic agents’ expectations formation process is suboptimal.

  • 31.
    Mossfeldt, Marcus
    et al.
    National Institute of Economic Research, Stockholm, Sweden.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    The persistent labour-market effects of the financial crisis2011In: Applied Economics Letters, ISSN 1350-4851, E-ISSN 1466-4291, Vol. 18, no 7, p. 637-642Article in journal (Refereed)
    Abstract [en]

    This article estimates the effects of the financial crisis on the Swedish labour market. Using an unobserved components model and an external forecast, we estimate a future path for the Nonaccelerating Inflation Rate of Unemployment (NAIRU). Judging by this analysis, the labour market will be in equilibrium again in 2013. Linking the NAIRU to other labourmarket variables through an estimated vector error correction model and population projections, it is found that this new equilibrium is associated with a smaller equilibrium labour force and lower equilibrium employment.

  • 32.
    Stockhammar, Pär
    et al.
    National Institute of Economic Research, Stockholm, Sweden.
    Österholm, Pär
    Örebro University, Örebro University School of Business.
    Do inflation expectations granger cause inflation?2018In: Economia Politica, ISSN 1120-2890, E-ISSN 1973-820X, Vol. 35, no 2, p. 403-431Article in journal (Refereed)
    Abstract [en]

    In this paper, we investigate whether survey measures of inflation expectations in Sweden Granger cause Swedish CPI inflation. This is done by studying the precision of out-of-sample forecasts from Bayesian VAR models using a sample of quarterly data from 1996 to 2016. It is found that the inclusion of inflation expectations in the models tends to improve forecast precision. However, the improvement is typically small enough that it could be described as economically irrelevant. One exception can possibly be found in the expectations of businesses in the National Institute of Economic Research's Economic Tendency Survey; when included in the models, these improve forecast precision in a meaningful way at short horizons. Taken together, it seems that the inflation expectations studied here do not provide a silver bullet for those who try to improve VAR-based forecasts of Swedish inflation. The largest benefits from using these survey expectations may instead perhaps be found among analysts and policy makers; they can after all provide relevant information concerning, for example, the credibility of the inflation target or challenges that the central bank might face when conducting monetary policy.

  • 33.
    Stockhammar, Pär
    et al.
    National Institute of Economic Research, Stockholm, Sweden.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Effects of US Policy uncertainty on Swedish GDP growth2016In: Empirical Economics, ISSN 0377-7332, E-ISSN 1435-8921, Vol. 50, no 2, p. 443-462Article in journal (Refereed)
    Abstract [en]

    In this paper, we study the effects of US policy uncertainty—measured as the policy uncertainty index of Baker et al. (Measuring economic policy uncertainty, 2013)—on Swedish GDP growth.Another source of spillovers of shocks to small open economies is thereby examined. We apply both Bayesian VAR models and spectral analysis to quarterly data from 1988 to 2013. Results show that increasing US policy uncertainty has significant negative effects on Swedish GDP growth. The effect seems to primarily stem from effects on investment growth and export growth. Our findings should prove useful to those who analyse and forecast the Swedish economy and potentially also other similar small open economies.

  • 34.
    Stockhammar, Pär
    et al.
    National Institute of Economic Research, Stockholm, Sweden.
    Österholm, Pär
    Örebro University, Örebro University School of Business.
    The Impact of US Uncertainty Shocks on Small Open Economies2017In: Open Economies Review, ISSN 0923-7992, E-ISSN 1573-708X, Vol. 28, no 2, p. 347-368Article in journal (Refereed)
    Abstract [en]

    In this paper, we investigate the impact of US uncertainty shocks on GDP growth in nine small open economies: Australia, Canada, Denmark, Finland, Iceland, New Zealand, Norway, Sweden and the United Kingdom. We compare the impact of two types of shocks: i) stock market volatility shocks and ii) policy uncertainty shocks. Using quarterly data from 1986Q1 to 2016Q1, this issue is analysed using Bayesian VAR models. Our results suggest that policy uncertainty seems to matter more than stock market volatility. Stock market volatility shocks appear to robustly have significant effects on Danish GDP growth. Policy uncertainty shocks, on the other hand, reliably lowers GDP growth in all five Nordic countries in a statistically significant manner. Statistically significant effects of policy uncertainty shocks on the Anglo-Saxon countries in our sample are harder to establish and are, in our preferred specification, only found for the United Kingdom.

  • 35.
    Österholm, Pär
    Sveriges Riksbank and Department of Economics, Uppsala University, Uppsala, Sweden.
    Can Forecasting Performance Be Improved by Considering the Steady State?: An Application to Swedish Inflation and Interest Rate2008In: Journal of Forecasting, ISSN 0277-6693, E-ISSN 1099-131X, Vol. 27, no 1, p. 41-51Article in journal (Refereed)
    Abstract [en]

    This paper investigates whether the forecasting performance of Bayesian autoregressive and vector autoregressive models can be improved by incorporating prior beliefs on the steady state of the time series in the system. Traditional methodology is compared to the new framework — in which a mean-adjusted form of the models is employed — by estimating the models on Swedish inflation and interest rate data from 1980 to 2004. Results show that the out-of-sample forecasting ability of the models is practically unchanged for inflation but significantly improved for the interest rate when informative prior distributions on the steady state are provided. The findings in this paper imply that this new methodology could be useful since it allows us to sharpen our forecasts in the presence of potential pitfalls such as near unit root processesand structural breaks, in particular when relying on small samples.

  • 36.
    Österholm, Pär
    Örebro University, Örebro University School of Business.
    Dyrt bromsa bopriserna med reporäntan2016In: Dagens Nyheter, ISSN 1101-2447Article in journal (Other (popular science, discussion, etc.))
  • 37.
    Österholm, Pär
    Örebro University, Örebro University School of Business.
    Flexibelt inflationsmål kan leda till problem2016In: Svenska Dagbladet, ISSN 1101-2412Article in journal (Other (popular science, discussion, etc.))
  • 38.
    Österholm, Pär
    Nationalekonomiska institutionen, Uppsala universitet, Uppsala, Sweden.
    Incorporating Judgement in Fan Charts2009In: Scandinavian Journal of Economics, ISSN 0347-0520, E-ISSN 1467-9442, Vol. 111, no 2, p. 387-415Article in journal (Refereed)
    Abstract [en]

    Within a decision-making group, such as a central bank’s monetary-policy committee, group members often hold differing views about the future of key economic variables. Such differences of opinion can be thought of as reflecting differing sets of judgement. This paper suggests modelling each agent’s judgement as one scenario in a macroeconomic model. Each judgement set has a specific dynamic impact on the system and, accordingly, a particular predictive density — or fan chart — associated with it. A weighted linear combination of the predictive densities yields a final predictive density that reflects the uncertainty perceived by the agents generating the forecast.

  • 39.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    The effect on the Swedish real economy of the financial crisis2010In: Applied Financial Economics, ISSN 0960-3107, E-ISSN 1466-4305, Vol. 20, no 4, p. 265-274Article in journal (Refereed)
    Abstract [en]

    This article investigates the effects of the financial crisis on the Swedish real economy. In order to do this, an index which describes the financial conditions of the Swedish economy is developed. The index indicates that domestic Swedish financial conditions have deteriorated substantially during 2008 and are now at the highest level since the crisis of the early 1990s. A Bayesian Vector Autoregression (BVAR) model with both US and Swedish variables is used to assess the quantitative effects of the financial crisis on Swedish real Gross Domestic Product (GDP) growth. Results suggest that the growth of the Swedish economy will be substantially slower in the next couple of years due to the financial crisis.

  • 40.
    Österholm, Pär
    Monetary Policy Department, Sveriges Riksbank, Stockholm, Sweden.
    The Limited Usefulness of Macroeconomic Bayesian VARs when Forecasting the Probability of a US Recession2012In: Journal of macroeconomics, ISSN 0164-0704, E-ISSN 1873-152X, Vol. 34, no 1, p. 76-86Article in journal (Refereed)
    Abstract [en]

    The Bayesian VAR model provides a convenient tool for generating predictive densities and making probability statements regarding the future development of economic variables. This paper investigates the usefulness of standard macroeconomic Bayesian VAR models to estimate the probability of a US recession. Defining a recession as two quarters in a row of negative GDP growth, the probability is estimated for two quarters of the most recent US recession, namely 2008Q3–2008Q4. In contrast to judgemental probabilities from this point in time, it is found that the BVAR assigns a very low probability to such an event. This is true also when survey data, which generally are considered as good leading indicators, are included in the models. We conclude that while Bayesian VAR models are good forecasting tools in many cases, the results in this paper raise question marks regarding their usefulness for predicting recessions.

  • 41.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    The Long-Run Relationship between Stock Prices and GDP in Sweden2016In: Economic notes - Monte dei Paschi di Siena, ISSN 0391-5026, E-ISSN 1468-0300, Vol. 45, no 2, p. 283-297Article in journal (Refereed)
    Abstract [en]

    In this paper, we investigate the long-run relationship between stock prices and GDP in Sweden. Using quarterly data from 1995 to 2015, our empirical analysis suggests that the two variables are cointegrated and, hence, that there exists a  long-run equilibrium relationship between them. In light of this long-run relationship, we estimate a vector error correction model. The estimated model outperforms a simple, but highly relevant, alternative method in an out-of-sample forecast exercise. It also provides information as to whether Swedish stocks are correctly valued. Results indicate that stocks in Sweden might be overvalued at the end of the sample and forecasts from the model suggest that the disequilibrium will generate a modest development in the stock market over a number of quarters.

  • 42.
    Österholm, Pär
    Örebro University, Örebro University School of Business.
    The relation between treasury yields and corporate bond yield spreads in Australia: Evidence from VARs2018In: Finance Research Letters, ISSN 1544-6123, E-ISSN 1544-6131, Vol. 24, p. 186-192Article in journal (Refereed)
    Abstract [en]

    In this paper we investigate the relation between treasury yields and corporate bond yield spreads. This is done by estimating VAR models on monthly Australian data from January 2005 to March 2017. Our results suggest—in line with mainstream theoretical models— that a higher risk free rate compresses the corporate bond yield spread. We also find that a higher corporate bond yield spread lowers the three-month treasury bill rate.

  • 43.
    Österholm, Pär
    Department of Economics, Uppsala University, Uppsala, Sweden.
    The Taylor Rule: A Spurious Regression?2005In: Bulletin of Economic Research, ISSN 0307-3378, E-ISSN 1467-8586, Vol. 57, no 3, p. 217-247Article in journal (Refereed)
    Abstract [en]

    This paper investigates the econometric properties of the Taylor (1993) rule applied to US, Australian and Swedish data to judge its empirical relevance. Unit root tests indicate that the variables in the Taylor rule are near integrated processes, implying that cointegration is a necessary condition both for consistent estimation of the parameters of the model and compatibility between the model and the data. Tests find little support for cointegration and, together with an out-of-sample forecast exercise, suggest that we should have serious doubts about the Taylor rule as a reasonable description of how monetary policy is presently conducted. Parameters in Taylor rule regressions are therefore likely to be inconsistently estimated, and caution should be taken before central bank policy is evaluated using such methods.

  • 44.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Time variation in Okun's law in Sweden2015In: Applied Economics Letters, ISSN 1350-4851, E-ISSN 1466-4291, Vol. 23, no 6, p. 436-439Article in journal (Refereed)
    Abstract [en]

    In this article we estimate an Okun’s law relationship for Sweden using a model with time-varying  parameters. Employing quarterly data from 1982 to 2014, results indicate that the GDP growth needed to keep the unemployment rate unchanged in the long rung has fallen considerably over the last 10 years.

  • 45.
    Österholm, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    Unemployment and Labour-Force Participation in Sweden2010In: Economics Letters, ISSN 0165-1765, E-ISSN 1873-7374, Vol. 106, no 3, p. 205-208Article in journal (Refereed)
    Abstract [en]

    This paper investigates the relationship between Swedish unemployment and labour-force participation. Cointegration analysis supports a robust long-run relationship between the two variables. This finding puts the empirical relevance of the unemployment invariance hypothesis into question.

  • 46.
    Österholm, Pär
    Örebro University, Örebro University School of Business.
    Är hushållens förväntningar rörande bolåneräntan realistiska?2017In: Ekonomisk Debatt, ISSN 0345-2646, Vol. 45, no 5, p. 22-32Article in journal (Other (popular science, discussion, etc.))
    Abstract [sv]

    I denna artikel studeras hushållens förväntningar på bolåneräntan. Analysen baseras på data från Konjunkturbarometern under perioden 2010 till 2016. Resultaten indikerar att hushållens förväntningar rörande den framtida bolåneräntan på ett års sikt i genomsnitt har varit för höga. Generellt sett tenderar dock förväntningarna att uppvisa rimliga egenskaper. Dessa resultat utesluter inte att somliga hushåll baserar sina beslut vid bostadsköp på orimligt låga förväntningar, men för hushållen som helhet förefaller det ändå befogat att dra slutsatsen att förväntningarna rörande bolåneräntan varit realistiska under den studerade perioden.

  • 47.
    Österholm, Pär
    et al.
    National Institute of Economic Research, Stockholm, Sweden.
    Stockhammar, Pär
    National Institute of Economic Research, Stockholm, Sweden.
    The euro crisis and Swedish GDP growth – a study of spillovers2014In: Applied Economics Letters, ISSN 1350-4851, E-ISSN 1466-4291, Vol. 21, no 16, p. 1105-1110Article in journal (Refereed)
    Abstract [en]

    In this article, a Bayesian VAR model is used to study the effects of euro area shocks on GDP growth in the small open economy of Sweden. A novel feature is that the new policy uncertainty index of Baker et al. (2013) is introduced in the model. The model behaves well in terms of reasonable impulse response functions. The specific effects of the euro crisis is investigated through a historical decomposition which shows that shocks to euro area GDP growth have been a reasonably important factor for Swedish GDP growth, supporting it during 2010 and holding it back thereafter. Generally, shocks to policy uncertainty have held back Swedish GDP growth during the euro crises.

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