Giuseppe Parigi

Bridge models to forecast the euro area GDP

Abstract Quantitative information on the current state of the economy is crucial to economic policy-making and to early understanding of the economic situation, but the quarterly national account (NA) data for GDP in the euro area are released with a substantial delay. The aim of the paper is to examine the forecast ability of bridge models (BM) for GDP growth in the euro area. BM ‘bridge the gap’ between the information content of timely updated indicators and the delayed (but more complete) NA. In this paper, BM are estimated for aggregate GDP and components both area-wide and for the three main countries of the euro area. Their short-term (one- and two-quarter ahead) forecasting performance is assessed with respect to benchmark univariate/multivariate statistical models, and a small structural model. The paper shows that national BM fare better than benchmark models. In addition, euro area GDP and its components are more precisely predicted by aggregating national forecasts.

Energy consumption, survey data and the prediction of industrial production in Italy: a comparison and combination of different models

We investigate the prediction of Italian industrial production. We first specify a model based on electricity consumption; we show that the cubic trend in such a model mostly captures the evolution over time of the electricity coefficient, which can be well approximated by a smooth transition model a la Terasvirta, with no gains in predictive power, though. We also analyze the performance of models based on data of different business surveys.

Family Firms and Investments

Family firms are a widespread control structure in most countries, especially among smaller firms. A vast literature addresses the question of whether they are performing better or worse than comparable non family firms, with not entirely conclusive results. Here we take a different, indirect approach and test whether investment decisions in family firms are more sensitive to uncertainty than in other firms. By using a novel dataset that includess both a better definition of family firms than commonly used (through self evaluation) and a very good proxy of the uncertainty on future demand that firms face, we are able to verify that – as compared to other firms – family firms are significantly more sensitive to uncertainty: this might contribute to explain why in some situations they perform better, whereas in others they do worse. We find evidence that this greater sensitivity to uncertainty in family firms is basically due to the effects of risk aversion and capital irreversibility, where the latter appear to be associated to a greater opaqueness of family firms rather than to the degree of sunkness of fixed capital. Finally, we propose some evidence that the prevalence of family firms in Italy might be associated to long standing institutional factors, such as an inefficient law enforcement system and a low social capital.

Le famiglie italiane e l'introduzione dell'euro: storia di uno shock annunciato

The aim of the paper is to analyse the evolution of households confidence during the last two years, by suggesting some interpretations about the relationships between the consumer confidence (sentiment) index (CCI) and a number of relevant macroeconomic indicators. Since the beginning of 2002, Italian households have been more and more pessimist, as recorded by the falling CCI levels (down till the levels of the 1992-93 recession). Through econometric models, where CCI depends on a number of macroeconomic variables, we show that the CCI equation seems to be characterised by a structural break since the first quarter of 2002 (it continuously overestimated actual levels). In an attempt to explain these dynamics, we relate the CCI to households perceived inflation, an additional indicator not included in the version of the model with a break. This inclusion considerably improves the explanatory power of the Italian model, and sweeps out any evidence of the previous break. The peculiarity of the Italian case is stressed by the comparison with the French and German cases (where nothing of that sort happened), and reinforces the idea that the changeover from the lira to the euro may be interpreted as a shock for Italian households.

Forecasting World Output: The Rising Importance of Emerging Economies

Assessing the global economic outlook is a fundamentally important task of international financial institutions, governments and central banks. In this paper we focus on the consequences of the rapid growth of emerging markets for monitoring and forecasting the global outlook. Our main results are that (i) the rise of the emerging countries has sharply altered the correlation of growth rates among the main economic areas; (ii) this is clearly detectable in forecasting equations as a structural break occurring in the 1990s; (iii) hence, inferences on global developments based solely on the industrialized countries are highly unreliable; (iv) the otherwise cumbersome task of monitoring many i?½ and less studied i?½ countries can be tackled by resorting to very simple bridge models (BM); (v) BM performance is in line with that of the most widely quoted predictions (WEO, Consensus) both before and during the recent crisis; (vi) for some emerging economies, BMs would have provided even better forecasts during the recent crisis.

Forecasting World Output: The Rising Importance of Emerging Asia

The rapid growth of the emerging markets and of China in particular has changed the economic landscape: emerging Asias share of world trade has grown from about 13% in 1990 to almost 23% in 2008, and its aggregate GDP now accounts for more than 25% of world output, compared with less than 12% in 1990. In this paper we focus on the consequences for the assessment of the global outlook and the specification of forecasting equations. Our main results are that (1) the rise of the emerging countries has led to a sharp change in the correlation of growth rates among main economic areas; (2) this is clearly detectable in forecasting equations too, as a structural break occurring in the 1990s; (3) hence, inferences about global developments based solely on the industrialized countries are highly unreliable; (4) the otherwise cumbersome task of monitoring many and little-known countries can be tackled by resorting to very simple bridge models (BM); (5) BM performance is in line with that of the most widely quoted predictions (WEO, Consensus Forecasts) both before and during the recent crisis; and (6) for some emerging economies, BMs would have provided even better forecasts during the recent crisis.