This paper provides an extensive analysis of the predictive ability of financial volatility measures for economic activity. We construct monthly measures of aggregated and industry-level stock volatility, and bond market volatility from daily returns. We model log financial volatility as composed of a long-run component that is common across all series, and a [...]
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Posted on May 8th, 2012
Posted on March 12th, 2012
Zje authors of this paper investigate if asset return volatility is predictable by macroeconomic and financial variables and shed light on the economic drivers of financial volatility. Their approach is distinct due to its comprehensiveness: First, they employ a data-rich forecast methodology to handle a large set of potential predictors in a Bayesian [...] Posted on March 1st, 2012
As international ties have been strengthened on the real economic front, global correlation has been higher in the government bond and other financial markets. Under the circumstances, Japanese banks’ market risk associated with holdings of Japanese government bonds (JGBs) has been more susceptible to overseas shocks as well as domestic shocks. Once, for [...] Posted on February 26th, 2012
Recent episodes (October 2008, May 2010, August 2011) have witnessed huge spikes in equity price risk (implied volatility). Apart from their large size, several features characterize these risk panics. They are global phenomena, shared among a broad set of countries. There is substantial variation though in the extent to which individual countries are [...] Posted on February 1st, 2012
Core inflation is under attack. Empirically, experts have become increasingly disappointed with its actual performance. Theoretically, while some claim that it is a key inflation predictor others argue that, by construction, that cannot be one of its main properties, at least in the short run. Even if true, core inflation could still be [...] 14 pages
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