Knut Aastveit - Academia.edu (original) (raw)

Papers by Knut Aastveit

Research paper thumbnail of CENTRE FOR APPLIED MACRO-AND PETROLEUM ECONOMICS (CAMP) Residential investment and recession predictability Residential investment and recession predictability ⇤ Knut Are Aastveit

We assess the importance of residential investment in predicting economic recessions for an unbal... more We assess the importance of residential investment in predicting economic recessions for an unbalanced panel of 12 OECD countries over the period 1960Q1-2014Q4. Our approach is to estimate various probit models with di↵erent leading indicators and evaluate their relative prediction accuracy using the receiver operating characteristic curve. We document that residential investment contains information useful in predicting recessions both in-sample and out-of-sample. This result is robust to adding typical leading indicators, such as the term spread, stock prices, consumer confidence surveys and oil prices. It is shown that residential investment is particularly useful in predicting recessions for countries with high home-ownership rates. Finally, in a separate exercise for the US economy, we show that the predictive ability of residential investment is robust to employing real-time data.

Research paper thumbnail of Nowcasting GDP in Real-Time: A Density Combination Approach Nowcasting GDP in Real-Time: A Density Combination Approach * Knut Are Aastveit

In this paper we use U.S. real-time vintage data and produce combined density nowcasts for quarte... more In this paper we use U.S. real-time vintage data and produce combined density nowcasts for quarterly GDP growth from a system of three commonly used model classes. The density nowcasts are combined in two steps. First, a wide selection of individual models within each model class are combined separately. Then, the nowcasts from the three model classes are combined into a single predictive density. We update the density now-cast for every new data release throughout the quarter, and highlight the importance of new information for the evaluation period 1990Q2-2010Q3. Our results show that the logarithmic score of the predictive densities for U.S. GDP increase almost monotonically as new information arrives during the quarter. While the best performing model class is changing during the quarter, the density nowcasts from our combination framework is always performing well both in terms of logarithmic scores and calibration tests. The density combination approach is superior to a simple...

Research paper thumbnail of Short-Term Forecasting of GDP and Inflation in Real-Time : Norges Bank’s System for Averaging Models

In this paper we describe Norges Bank’s system for averaging models (SAM) which produces model-ba... more In this paper we describe Norges Bank’s system for averaging models (SAM) which produces model-based density forecasts for Norwegian Mainland GDP and inflation. We combine the forecasts from three main types of models typically used at central banks: Vector autoregressive models, leading indicator models and factor models. By combining models we hedge against uncertain instabilities. We update SAM several times during the quarter to highlight the importance of new data releases, and we show how the performance of SAM improves steadily as new information arrives. The framework is robust with regard to alternative vintages of data to evaluate against. We show that our chosen weighting scheme is superior or on a par with some common alternative weighting schemes, and, finally, that a strategy of trying to pick the best model, ex ante, is inferior to model combination. JEL-codes: C32, C52, C53, E37, E52.

Research paper thumbnail of Norges Banks System for Short-term Forecasting of Macroeconomic Variables

Research paper thumbnail of House prices , monetary policy and regional heterogeneity ∗

The effectiveness of monetary policy in affecting house prices depend both on the nature of the s... more The effectiveness of monetary policy in affecting house prices depend both on the nature of the shock; expansionary versus contractionary, and on local housing market characteristics. In particular, our results suggest that monetary policy is more effective when it is expansionary and in markets with low housing supply elasticities. While expansionary and contractionary shocks have similar impacts on house prices in markets with an elastic housing supply, the effect of expansionary shocks are markedly larger than the impact of contractionary shocks in supply inelastic areas. These conclusions are drawn based on an empirical examination of the effects of exogenous monetary policy shocks on house prices using local projection methods on a panel of the 100 largest metro areas in the US over the period 1980Q1–2008Q4.

Research paper thumbnail of Quantifying time-varying forecast uncertainty and risk for the real price of oil

SSRN Electronic Journal

We propose a novel and numerically efficient quantification approach to forecast uncertainty of t... more We propose a novel and numerically efficient quantification approach to forecast uncertainty of the real price of oil using a combination of probabilistic individual model forecasts. Our combination method extends earlier approaches that have been applied to oil price forecasting, by allowing for sequentially updating of time-varying combination weights, estimation of time-varying forecast biases and facets of miscalibration of individual forecast densities and time-varying inter-dependencies among models. To illustrate the usefulness of the method, we present an extensive set of empirical results about time-varying forecast uncertainty and risk for the real price of oil over the period 1974-2018. We show that the combination approach systematically outperforms commonly used benchmark models and combination approaches, both in terms of point and density forecasts. The dynamic patterns of the estimated individual model weights are highly time-varying, reflecting a large time variation in the relative performance of the various individual models. The combination approach has built-in diagnostic information measures about forecast inaccuracy and/or model set incompleteness, which provide clear signals of model incompleteness during three crisis periods. To highlight that our approach also can be useful for policy analysis, we present a basic analysis of profit-loss and hedging against price risk.

Research paper thumbnail of Has the Fed Responded to House and Stock Prices? A Time-Varying Analysis

SSRN Electronic Journal

Fra 1999 og senere er publikasjonene tilgjengelige på www.norges-bank.no Working papers inneholde... more Fra 1999 og senere er publikasjonene tilgjengelige på www.norges-bank.no Working papers inneholder forskningsarbeider og utredninger som vanligvis ikke har fått sin endelige form. Hensikten er blant annet at forfatteren kan motta kommentarer fra kolleger og andre interesserte. Synspunkter og konklusjoner i arbeidene står for forfatternes regning.

Research paper thumbnail of Inflation Expectations and the Pass-Through of Oil Prices

The Review of Economics and Statistics, 2021

Inflation expectations and the associated pass-through of oil price shocks depend on demand and s... more Inflation expectations and the associated pass-through of oil price shocks depend on demand and supply conditions underlying the global oil market. We establish this result using a structural VAR model of the global oil market that jointly identifies transmissions of oil demand and supply shocks through real oil prices to both expected and actual inflation. We demonstrate that economic activity shocks have a significantly longer lasting effect on inflation expectations and actual inflation than other types of real oil price shocks, and resolve disagreements around the role of oil prices in explaining the missing deflation puzzle of the Great Recession.

Research paper thumbnail of Nowcasting GDP in Real Time: A Density Combination Approach

Journal of Business and Economic Statistics, Jan 30, 2014

In this paper we use an expert combination framework to produce density combination nowcasts for ... more In this paper we use an expert combination framework to produce density combination nowcasts for Norwegian Mainland-GDP from a system of VARs, leading indicator models, factor models and a DSGE model. We update the density nowcasts from our forecast combination framework several times during the quarter and highlight the importance of new data releases. We first show that the logarithmic score of the predictive densities for Norwegian Mainland-GDP increase monotonically as new information arrives during the quarter. Second, we show that the predictive densities for our combination approach is well-calibrated throughout the quarter, while this is not the case for all of the individual models and model classes. Especially, the predictive densities for the DSGE model do not match the performance of the other model classes.

Research paper thumbnail of Identification and real-time forecasting of Norwegian business cycles

International Journal of Forecasting, 2016

Research paper thumbnail of Identification and Real-Time Forecasting of Norwegian Business Cycles

SSRN Electronic Journal, 2000

Research paper thumbnail of Density Forecasts with MIDAS Models

SSRN Electronic Journal, 2000

Research paper thumbnail of Combined Density Nowcasting in an Uncertain Economic Environment

SSRN Electronic Journal, 2000

Research paper thumbnail of Have Standard VARs Remained Stable Since the Crisis?

SSRN Electronic Journal, 2000

Research paper thumbnail of What Drives Oil Prices? Emerging Versus Developed Economies

Journal of Applied Econometrics, 2014

ABSTRACT This paper explores the role of demand from emerging and developed economies as drivers ... more ABSTRACT This paper explores the role of demand from emerging and developed economies as drivers of the real price of oil. Using a method that allows us to identify and compare demand from different groups of countries across the world, we find that demand from emerging economies (most notably from Asian countries) is more than twice as important as demand from developed countries in accounting for the uctuations in the real price of oil and in oil production. Furthermore, we find that different geographical regions respond differently to adverse oil market shocks that drive up oil prices, with Europe and North America being more negatively affected than emerging economies in Asia and South America. We demonstrate that this heterogeneity in responses is not only attributable to differences in energy intensity in production across regions but also to degree of openness and the investment share in GDP.

Research paper thumbnail of What Drives Oil Prices? Emerging versus Developed Economies

SSRN Electronic Journal, 2000

ABSTRACT This paper explores the role of demand from emerging and developed economies as drivers ... more ABSTRACT This paper explores the role of demand from emerging and developed economies as drivers of the real price of oil. Using a method that allows us to identify and compare demand from different groups of countries across the world, we find that demand from emerging economies (most notably from Asian countries) is more than twice as important as demand from developed countries in accounting for the uctuations in the real price of oil and in oil production. Furthermore, we find that different geographical regions respond differently to adverse oil market shocks that drive up oil prices, with Europe and North America being more negatively affected than emerging economies in Asia and South America. We demonstrate that this heterogeneity in responses is not only attributable to differences in energy intensity in production across regions but also to degree of openness and the investment share in GDP.

Research paper thumbnail of The World is Not Enough! Small Open Economies and Regional Dependence

SSRN Electronic Journal, 2000

This paper bridges the new open economy factor augmented VAR (FAVAR) studies with the recent find... more This paper bridges the new open economy factor augmented VAR (FAVAR) studies with the recent findings in the business cycle synchronization literature emphasizing the importance of regional factors. That is, we estimate and identify a three block FAVAR model with separate world, regional and domestic blocks and study the transmission of both global and regional shocks to four small open economies (Canada, New Zealand, Norway and UK). The results show that foreign shocks explain a major share of the variance in all countries, most so shocks that are common to the world. However, regional shocks also play an important role, explaining more than 20 percent of the variance in the variables. Hence in small open economies, the world is not enough. The regional factors impact the four countries differently, though, some through trade and some through consumer sentiment. Our findings of a strong transmission of both global and regional shocks to open economies are in sharp contrast to the evidence from recently developed open economy DSGE models.

Research paper thumbnail of The world is not enough! Monetary policy and regional dependence

A long standing literature has investigated the patterns of globalization and regionalism, and th... more A long standing literature has investigated the patterns of globalization and regionalism, and their impact on business cycle synchronization. While earlier studies emphasized the importance of world factors in describing the evolution of domestic business cycles, more recent studies have pointed out that despite the importance of common global forces; the business cycles across the world have not become more synchronized. This could suggest that country specific factors (such as monetary policy) play a major role for business cycles or that clusters of countries/regions are more dependent, i.e. the business cycles in a given region will be synchronized, but across a region, the cycles diverge. A major challenge when analyzing these issues is how to separate the truly common global factors from the regional factors, while also identifying domestic monetary policy shocks. We address this issue by estimating a three block factor augmented VAR (FAVAR) model with separate world, regiona...

Research paper thumbnail of Forecasting Recessions in Real Time

SSRN Electronic Journal, 2000

Research paper thumbnail of Estimating the output gap in real time: A factor model approach

The Quarterly Review of Economics and Finance, 2014

: tjenestetorget@norges-bank.no eller ved henvendelse til: Norges Bank, Abonnementsservice Postbo... more : tjenestetorget@norges-bank.no eller ved henvendelse til: Norges Bank, Abonnementsservice Postboks 1179 Sentrum 0107 Oslo Telefon 22 31 63 83, Telefaks 22 41 31 05 Fra 1999 og senere er publikasjonene tilgjengelige på www.norges-bank.no.

Research paper thumbnail of CENTRE FOR APPLIED MACRO-AND PETROLEUM ECONOMICS (CAMP) Residential investment and recession predictability Residential investment and recession predictability ⇤ Knut Are Aastveit

We assess the importance of residential investment in predicting economic recessions for an unbal... more We assess the importance of residential investment in predicting economic recessions for an unbalanced panel of 12 OECD countries over the period 1960Q1-2014Q4. Our approach is to estimate various probit models with di↵erent leading indicators and evaluate their relative prediction accuracy using the receiver operating characteristic curve. We document that residential investment contains information useful in predicting recessions both in-sample and out-of-sample. This result is robust to adding typical leading indicators, such as the term spread, stock prices, consumer confidence surveys and oil prices. It is shown that residential investment is particularly useful in predicting recessions for countries with high home-ownership rates. Finally, in a separate exercise for the US economy, we show that the predictive ability of residential investment is robust to employing real-time data.

Research paper thumbnail of Nowcasting GDP in Real-Time: A Density Combination Approach Nowcasting GDP in Real-Time: A Density Combination Approach * Knut Are Aastveit

In this paper we use U.S. real-time vintage data and produce combined density nowcasts for quarte... more In this paper we use U.S. real-time vintage data and produce combined density nowcasts for quarterly GDP growth from a system of three commonly used model classes. The density nowcasts are combined in two steps. First, a wide selection of individual models within each model class are combined separately. Then, the nowcasts from the three model classes are combined into a single predictive density. We update the density now-cast for every new data release throughout the quarter, and highlight the importance of new information for the evaluation period 1990Q2-2010Q3. Our results show that the logarithmic score of the predictive densities for U.S. GDP increase almost monotonically as new information arrives during the quarter. While the best performing model class is changing during the quarter, the density nowcasts from our combination framework is always performing well both in terms of logarithmic scores and calibration tests. The density combination approach is superior to a simple...

Research paper thumbnail of Short-Term Forecasting of GDP and Inflation in Real-Time : Norges Bank’s System for Averaging Models

In this paper we describe Norges Bank’s system for averaging models (SAM) which produces model-ba... more In this paper we describe Norges Bank’s system for averaging models (SAM) which produces model-based density forecasts for Norwegian Mainland GDP and inflation. We combine the forecasts from three main types of models typically used at central banks: Vector autoregressive models, leading indicator models and factor models. By combining models we hedge against uncertain instabilities. We update SAM several times during the quarter to highlight the importance of new data releases, and we show how the performance of SAM improves steadily as new information arrives. The framework is robust with regard to alternative vintages of data to evaluate against. We show that our chosen weighting scheme is superior or on a par with some common alternative weighting schemes, and, finally, that a strategy of trying to pick the best model, ex ante, is inferior to model combination. JEL-codes: C32, C52, C53, E37, E52.

Research paper thumbnail of Norges Banks System for Short-term Forecasting of Macroeconomic Variables

Research paper thumbnail of House prices , monetary policy and regional heterogeneity ∗

The effectiveness of monetary policy in affecting house prices depend both on the nature of the s... more The effectiveness of monetary policy in affecting house prices depend both on the nature of the shock; expansionary versus contractionary, and on local housing market characteristics. In particular, our results suggest that monetary policy is more effective when it is expansionary and in markets with low housing supply elasticities. While expansionary and contractionary shocks have similar impacts on house prices in markets with an elastic housing supply, the effect of expansionary shocks are markedly larger than the impact of contractionary shocks in supply inelastic areas. These conclusions are drawn based on an empirical examination of the effects of exogenous monetary policy shocks on house prices using local projection methods on a panel of the 100 largest metro areas in the US over the period 1980Q1–2008Q4.

Research paper thumbnail of Quantifying time-varying forecast uncertainty and risk for the real price of oil

SSRN Electronic Journal

We propose a novel and numerically efficient quantification approach to forecast uncertainty of t... more We propose a novel and numerically efficient quantification approach to forecast uncertainty of the real price of oil using a combination of probabilistic individual model forecasts. Our combination method extends earlier approaches that have been applied to oil price forecasting, by allowing for sequentially updating of time-varying combination weights, estimation of time-varying forecast biases and facets of miscalibration of individual forecast densities and time-varying inter-dependencies among models. To illustrate the usefulness of the method, we present an extensive set of empirical results about time-varying forecast uncertainty and risk for the real price of oil over the period 1974-2018. We show that the combination approach systematically outperforms commonly used benchmark models and combination approaches, both in terms of point and density forecasts. The dynamic patterns of the estimated individual model weights are highly time-varying, reflecting a large time variation in the relative performance of the various individual models. The combination approach has built-in diagnostic information measures about forecast inaccuracy and/or model set incompleteness, which provide clear signals of model incompleteness during three crisis periods. To highlight that our approach also can be useful for policy analysis, we present a basic analysis of profit-loss and hedging against price risk.

Research paper thumbnail of Has the Fed Responded to House and Stock Prices? A Time-Varying Analysis

SSRN Electronic Journal

Fra 1999 og senere er publikasjonene tilgjengelige på www.norges-bank.no Working papers inneholde... more Fra 1999 og senere er publikasjonene tilgjengelige på www.norges-bank.no Working papers inneholder forskningsarbeider og utredninger som vanligvis ikke har fått sin endelige form. Hensikten er blant annet at forfatteren kan motta kommentarer fra kolleger og andre interesserte. Synspunkter og konklusjoner i arbeidene står for forfatternes regning.

Research paper thumbnail of Inflation Expectations and the Pass-Through of Oil Prices

The Review of Economics and Statistics, 2021

Inflation expectations and the associated pass-through of oil price shocks depend on demand and s... more Inflation expectations and the associated pass-through of oil price shocks depend on demand and supply conditions underlying the global oil market. We establish this result using a structural VAR model of the global oil market that jointly identifies transmissions of oil demand and supply shocks through real oil prices to both expected and actual inflation. We demonstrate that economic activity shocks have a significantly longer lasting effect on inflation expectations and actual inflation than other types of real oil price shocks, and resolve disagreements around the role of oil prices in explaining the missing deflation puzzle of the Great Recession.

Research paper thumbnail of Nowcasting GDP in Real Time: A Density Combination Approach

Journal of Business and Economic Statistics, Jan 30, 2014

In this paper we use an expert combination framework to produce density combination nowcasts for ... more In this paper we use an expert combination framework to produce density combination nowcasts for Norwegian Mainland-GDP from a system of VARs, leading indicator models, factor models and a DSGE model. We update the density nowcasts from our forecast combination framework several times during the quarter and highlight the importance of new data releases. We first show that the logarithmic score of the predictive densities for Norwegian Mainland-GDP increase monotonically as new information arrives during the quarter. Second, we show that the predictive densities for our combination approach is well-calibrated throughout the quarter, while this is not the case for all of the individual models and model classes. Especially, the predictive densities for the DSGE model do not match the performance of the other model classes.

Research paper thumbnail of Identification and real-time forecasting of Norwegian business cycles

International Journal of Forecasting, 2016

Research paper thumbnail of Identification and Real-Time Forecasting of Norwegian Business Cycles

SSRN Electronic Journal, 2000

Research paper thumbnail of Density Forecasts with MIDAS Models

SSRN Electronic Journal, 2000

Research paper thumbnail of Combined Density Nowcasting in an Uncertain Economic Environment

SSRN Electronic Journal, 2000

Research paper thumbnail of Have Standard VARs Remained Stable Since the Crisis?

SSRN Electronic Journal, 2000

Research paper thumbnail of What Drives Oil Prices? Emerging Versus Developed Economies

Journal of Applied Econometrics, 2014

ABSTRACT This paper explores the role of demand from emerging and developed economies as drivers ... more ABSTRACT This paper explores the role of demand from emerging and developed economies as drivers of the real price of oil. Using a method that allows us to identify and compare demand from different groups of countries across the world, we find that demand from emerging economies (most notably from Asian countries) is more than twice as important as demand from developed countries in accounting for the uctuations in the real price of oil and in oil production. Furthermore, we find that different geographical regions respond differently to adverse oil market shocks that drive up oil prices, with Europe and North America being more negatively affected than emerging economies in Asia and South America. We demonstrate that this heterogeneity in responses is not only attributable to differences in energy intensity in production across regions but also to degree of openness and the investment share in GDP.

Research paper thumbnail of What Drives Oil Prices? Emerging versus Developed Economies

SSRN Electronic Journal, 2000

ABSTRACT This paper explores the role of demand from emerging and developed economies as drivers ... more ABSTRACT This paper explores the role of demand from emerging and developed economies as drivers of the real price of oil. Using a method that allows us to identify and compare demand from different groups of countries across the world, we find that demand from emerging economies (most notably from Asian countries) is more than twice as important as demand from developed countries in accounting for the uctuations in the real price of oil and in oil production. Furthermore, we find that different geographical regions respond differently to adverse oil market shocks that drive up oil prices, with Europe and North America being more negatively affected than emerging economies in Asia and South America. We demonstrate that this heterogeneity in responses is not only attributable to differences in energy intensity in production across regions but also to degree of openness and the investment share in GDP.

Research paper thumbnail of The World is Not Enough! Small Open Economies and Regional Dependence

SSRN Electronic Journal, 2000

This paper bridges the new open economy factor augmented VAR (FAVAR) studies with the recent find... more This paper bridges the new open economy factor augmented VAR (FAVAR) studies with the recent findings in the business cycle synchronization literature emphasizing the importance of regional factors. That is, we estimate and identify a three block FAVAR model with separate world, regional and domestic blocks and study the transmission of both global and regional shocks to four small open economies (Canada, New Zealand, Norway and UK). The results show that foreign shocks explain a major share of the variance in all countries, most so shocks that are common to the world. However, regional shocks also play an important role, explaining more than 20 percent of the variance in the variables. Hence in small open economies, the world is not enough. The regional factors impact the four countries differently, though, some through trade and some through consumer sentiment. Our findings of a strong transmission of both global and regional shocks to open economies are in sharp contrast to the evidence from recently developed open economy DSGE models.

Research paper thumbnail of The world is not enough! Monetary policy and regional dependence

A long standing literature has investigated the patterns of globalization and regionalism, and th... more A long standing literature has investigated the patterns of globalization and regionalism, and their impact on business cycle synchronization. While earlier studies emphasized the importance of world factors in describing the evolution of domestic business cycles, more recent studies have pointed out that despite the importance of common global forces; the business cycles across the world have not become more synchronized. This could suggest that country specific factors (such as monetary policy) play a major role for business cycles or that clusters of countries/regions are more dependent, i.e. the business cycles in a given region will be synchronized, but across a region, the cycles diverge. A major challenge when analyzing these issues is how to separate the truly common global factors from the regional factors, while also identifying domestic monetary policy shocks. We address this issue by estimating a three block factor augmented VAR (FAVAR) model with separate world, regiona...

Research paper thumbnail of Forecasting Recessions in Real Time

SSRN Electronic Journal, 2000

Research paper thumbnail of Estimating the output gap in real time: A factor model approach

The Quarterly Review of Economics and Finance, 2014

: tjenestetorget@norges-bank.no eller ved henvendelse til: Norges Bank, Abonnementsservice Postbo... more : tjenestetorget@norges-bank.no eller ved henvendelse til: Norges Bank, Abonnementsservice Postboks 1179 Sentrum 0107 Oslo Telefon 22 31 63 83, Telefaks 22 41 31 05 Fra 1999 og senere er publikasjonene tilgjengelige på www.norges-bank.no.