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Robustness and fragility in Leamer's sense are defined with respect to a particular coefficient over a class of models. This paper shows that inclusion of the data generation process in that class of models is neither necessary nor sufficient for robustness. This result holds even if the properly specified model has well-determined, statistically significant coefficients. The encompassing principle explains how this result can occur. Encompassing also provides a link to a more common-sense notion of robustness, which is still a desirable property empirically; and encompassing clarifies recent discussion on model averaging and the pooling of forecasts. [ABSTRACT FROM AUTHOR]

Focuses on a study which investigated whether typical estimates of the relationship between output growth and inflation from cross-country regressions are relevant to the major industrial countries. Synopsis of existing cross-country results; Problems with the cross-country analyses; Conclusions.

This article comments on the paper "On the Limitations of Comparing Mean Square Forecast Errors," by M.P. Clements and D.F. Hendry, published in the December 1993 issue of the "Journal of Forecasting." Clements and Hendry, in their paper, examine criteria for evaluating forecasts and show how several standard criteria are not robust to linear scale-preserving non-singular transformations' of the models generating the forecasts. Specifically, several criteria are not invariant to such transformations of a given model; and rankings of models by those criteria are not invariant to the transformation chosen, given a common transformation. The author's comments concern the nature and effects of those transformations, empirical implications, and forecast-encompassing tests.

Presents an update of the empirical model developed by Hendry and Ericsson of the demand for broad money in the United Kingdom over 1878-1975. Factors accounted for in the update of the model; Appropriation of measures of opportunity cost and credit deregulation; Details on the models parameters; Identification of the issues which policy implications are provided for.

The article focuses on hazards in implementing a monetary conditions index in Canada. In recent years, the focus of monetary policy in many countries has shifted from intermediate targets such as monetary growth rates to more final policy targets such as macroeconomic stability and growth. This change in focus has increased interest in quantifying the effects of policy instruments on output and inflation, and in using such estimates in the conduct of monetary policy. The Bank of Canada has proposed a univariate measure of the effects of the real interest rate level and the real exchange rate on economic activity and inflation: a Monetary Conditions Index (MCI). The index is a weighted sum of changes in a short-term interest rate and the exchange rate relative to values in a baseline year, with the weights reflecting these variables' estimated relative effects on the longer-term target variable, such as output or inflation. MCIs are now calculated by a number of central banks and policy organizations.

The articles examines the asymptotic and finite simple properties of the two procedures for a simple, single-lag bivariate process. It suggests that even with more lags and more variables, the reason for the low power of the Dickey-Fuller test remains. The error-correction-based test is preferable because it uses available information more efficiently than the Dickey-Fuller test. The article describes the process of interest and derives the relationship between the error-correction mechanism and the equation from which the Dickey-Fuller statistic is calculated.

Reviews the econometrics software PC-GIVE 6.01.

Evaluates the computer software, Data-FIT. Compatibility of Data-FIT with the personal computers of IBM; Evaluation of empirical time-series models based on economic theory; Central issues associated with the methodology behind Data-FIT.

Investigates the effect of dynamics and simultaneity on the finite sample properties of instrumental variables statistics. Characteristics of instrumental variables for testing nested and non-nested hypothesis; Limitations of asymptotic theory in interpreting finite sample properties; Use of Monte Carlo methodology.

Agricultural baselines facilitate policy and investment decisions by governments and market participants by providing long‐term projections about the farm sector. Despite their importance in shaping agricultural policy, the agricultural baselines have not been rigorously evaluated. This study evaluates the accuracy and informativeness of two widely used baselines for the US farm sector published by the United States Department of Agriculture (USDA) and the Food and Agricultural Policy Research Institute (FAPRI) in three steps. First, we examine the average percent errors of the projections and perform tests of bias. Second, we use a testing framework based on the encompassing principle to test the predictive content of the projections for each horizon, determining the longest informative projection horizon. Third, we compare the USDA and FAPRI baseline projections using a multi‐horizon framework that considers all projection horizons jointly. We find that prediction error and bias increase with the horizon's length. The predictive content of the baselines projections for most variables diminishes after 4–5 years. The multi‐horizon comparison suggests that neither USDA nor FAPRI projections have uniform or average superior predictive ability over the other for most variables. Our findings are useful for the agencies producing these baselines and for the policymakers, agricultural businesses, and other stakeholders who use them. The study contributes to the recent literature on long‐term agricultural projections and establishes the groundwork for future research inquiries. [ABSTRACT FROM AUTHOR]

The aim of this paper is to investigate whether there exists a long-run relationship between the real exchange rate and the commodity terms of trade in the so-called Mediterranean or MENA countries. These economies are good candidates for this type of formulation, as are commodity exporting countries. Using cointegration techniques, we find long-run relationships linking the real exchange rate and a commodity-based measure of the terms of trade. Therefore, commodity terms of trade are a potential explanation for the apparent nonstationarity of MENA countries’ real exchange rates previously found in the empirical literature. [ABSTRACT FROM AUTHOR]

In a study of nine Asia-Pacific countries' real exchange rates, Chinn (2000) finds some evidence in support of the Balassa (1964) and Samuelson (1964) hypothesis. His findings, however, are based on the application of a model containing several potentially restrictive simplifying assumptions to a dataset of limited span. Consequently, we look to assess the effect on Chinn's findings of considerably increasing the sample size and relaxing these assumptions. We find a comparable level of evidence for the Balassa–Samuelson hypothesis when applying Chinn's model to the larger sample, but obtain significantly greater support when a less restrictive approach is adopted. [ABSTRACT FROM AUTHOR]

Inflation targeting has become an alternative monetary strategy that has been followed by many industrial and emerging countries. This study considers whether the adoption of inflation targeting would be relevant for Tunisia. More specifically, this paper aims at checking whether the necessary conditions for the successful implementation of such a strategy are fulfilled or not. It is found that fiscal dominance does not constitute the main hindrance to the adoption of inflation targeting. Other impediments have been identified, especially a weak financial system in general, the unsound and fragile banking system in particular, and the glaring lack of knowledge about the monetary transmission mechanism. Furthermore, it has been pointed out that if Tunisian monetary authorities continue to carry out the present exchange rate regime, namely, the constant real exchange rate rule, an inflation targeting regime will not be sufficient to properly contain the inflation pressures caused by demand shocks. [ABSTRACT FROM AUTHOR]

A large body of literature investigates whether a stable and predictable long-run association between money and its arguments exists. One point of variation between models is whether to include an interest rate measure directly within the long-run relationship. Several recent studies indicate that empirical findings are sensitive to the choice. Therefore, the present article reexamines the empirical significance of the interest rate within a four-equation macroeconomic system. The results suggest that the interest rate (1) may be excluded from the M2 demand function, (2) is strongly exogenous to most of the system's remaining variables, and (3) may represent a common trend. [ABSTRACT FROM AUTHOR]

Examines the empirical basis for monetary targeting in South Africa. Financial variables, prices and real activity; Monetarism as focus of central banking practice in South Africa; Impact of monetary policy actions on long-run output; Absence of a relationship between monetary aggregates and nominal or real income.

This paper examines the relationship between real exchange rates and real interest rates using three different approaches across four currencies and two horizons with 20 years of data. Each approach gives some encouragement that this relationship might hold, but each approach also encounters problems establishing the form or usefulness of the relationship. On balance, this paper contributes to the literature by finding more encouraging results than in earlier studies, but it still remains to be demonstrated that the real exchange rate--real interest rate relationship is the linchpin to explaining exchange rate movements. [ABSTRACT FROM AUTHOR]