Shock Identification of Macroeconomic Forecasts Based on Daily Panels

34 Pages Posted: 26 Apr 2005

See all articles by Andreas M. Fischer

Andreas M. Fischer

Swiss National Bank; Centre for Economic Policy Research (CEPR)

Marlene Amstad

The Chinese University of Hong Kong, Shenzhen

Multiple version iconThere are 2 versions of this paper

Date Written: April 2005

Abstract

This paper proposes a new procedure for shock identification of macroeconomic forecasts based on factor analysis. Our identification scheme for information shocks relies on data reduction techniques for daily panels and the recognition that macroeconomic releases exhibit a high level of clustering. A large number of data releases on a single day is of considerable practical interest not only for the estimation but also for the identification of the factor model. The clustering of cross-sectional information facilitates the interpretation of the forecast innovations as real or as nominal information shocks. An empirical application is provided for Swiss inflation. We show that (i) the monetary policy shocks generate an asymmetric response to inflation, (ii) the pass-through for consumer price index inflation is weak, and (iii) the information shocks to inflation are not synchronized.

Keywords: common factors, inflation forecasting, daily panels, shock identification

JEL Classification: E37, E52, E58

Suggested Citation

Fischer, Andreas M. and Amstad, Marlene, Shock Identification of Macroeconomic Forecasts Based on Daily Panels (April 2005). FRB of New York Staff Report No. 206. Available at SSRN: https://ssrn.com/abstract=711172 or http://dx.doi.org/10.2139/ssrn.711172

Andreas M. Fischer

Swiss National Bank ( email )

Borsenstrasse 15
CH-8022 Zurich
Switzerland
+41 1 631 3294 (Phone)
+41 1 631 3901 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Marlene Amstad (Contact Author)

The Chinese University of Hong Kong, Shenzhen ( email )

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