Predicting Net Discount Rates: A Comparison of Professional Forecasts, Time-series Forecasts and Traditional Methods

2010 ◽  
Vol 21 (2) ◽  
pp. 147-171 ◽  
Author(s):  
Matthew J. Cushing ◽  
David I. Rosenbaum
Keyword(s):  
Time Series ◽  
Random Walk ◽  
Interest Rate ◽  
Discount Rate ◽  
Discount Rates ◽  
Class Of Estimators ◽  
And Performance ◽  
Two Alternatives ◽  
Better Than

Abstract Previous research proposed two future net discount rate estimators that improved on naïve long-term average and random walk estimators. The proposed estimators were superior in the class of estimators that used only current and past observations on net discount rates. In this paper we consider two extensions. First we examine whether professional forecasts perform significantly better than the two alternatives. Second, we examine the properties and performance of multivariate estimators that account for the potentially differing time-series behaviors of the underlying wage growth and interest rate series.

scholarly journals Assessing the Fiscal Sustainability of Government Finances in European Countries

2013 ◽  
Vol 52 (1) ◽  
pp. 87-93
Author(s):  
Yuriy Melnykov
Keyword(s):  
Growth Rate ◽  
Time Series ◽  
Interest Rate ◽  
Unit Root ◽  
Statistical Approach ◽  
Fiscal Sustainability ◽  
European Countries ◽  
Gdp Growth ◽  
Gdp Growth Rate

This paper analyses the fiscal sustainability of government finances in the 27 EU countries and Norway using an empirical, statistical approach and ADF tests for a unit root in the time series of the differences between the GDP growth rate and the long-term interest rate, and the primary balance.

A Theory of the Decreasing Term Structure of Discount Rates

2012 ◽  
Author(s):  
Christian Gollier
Keyword(s):  
Economic Growth ◽  
Random Walk ◽  
Term Structure ◽  
Stochastic Models ◽  
Driving Force ◽  
Parametric Uncertainty ◽  
Statistical Dependence ◽  
Discount Rates ◽  
Individual Preferences

This chapter aims to provide a unified theoretical foundation to the term structure of discount rates. To do this the chapter develops a benchmark model based on two assumptions: individual preferences toward risk, and the nature of the uncertainty over economic growth. Previously, it was shown that constant relative risk aversion, combined with a random walk for the growth of log consumption, yields a flat term structure for efficient discount rates. In this chapter, these two assumptions are relaxed by using a stochastic dominance approach. Stochastic models of economic growth with mean-reversion, Markov switches, and parametric uncertainty all exhibit some forms of positive statistical dependence of successive growth rates. Because this tends to magnify the long-term risk, it is the driving force of the decreasing nature of the term structure.

scholarly journals Credit Cycles: Econometric Analysis and Evidence for Russia

2014 ◽  
pp. 113-122
Author(s):  
N. V. Artamonov ◽  
D. V. Artamonov ◽  
V. A. Artamonov
Keyword(s):  
Time Series ◽  
Interest Rate ◽  
Interest Rates ◽  
Russian Federation ◽  
Statistical Data ◽  
Econometric Analysis ◽  
Short Term ◽  
Credit Cycles ◽  
Real Gdp

One of the principal problem in contemporary macroeconomics is concerned with factors increasing or decreasing economic dynamics. The mainstream approach is based on neoclassical assumptions, but recently new approaches appear mostly based on new Keynesian concepts. In present time the influence of monetary market and credit instruments become more and more significant. Credit resources of banking and financial structures can affect and distort to reallocation of resources for national and even for global economic. In present paper an empiric and econometric analysis for some macroeconometric and monetary indices for Russian Federation is done. An econometrical models describing the influence of credit variables onto real GDP is estimated. It is shown that in short-term periods changes in credit variables do influence significantly onto GDP. It is shown that on short-term periods changes in money aggregate M2 brings influence (through credit variables) onto national output. As well it is shown that changes in short-term interest rate brings significant negative influence onto real output. Impulse response functions for GDP on shocks of credit variables, monetary base and short-term interest rate are evaluated. For the present study of credit cycles and their impact to real business cycles statistical data (quarterly time series) on the following factors for Russian Federation are collected: nominal and real GDP, monetary base M2, short-term interest rate, long-term interest rate (10-year treasuries bill rate), total debt outstanding. All time series are seasonally adjusted and collected for the period 2004 Q1 - 2013 Q2. All interest rates are adjusted for inflation (i.e. we deal with real interest rates). The investigation of long-term relationship for the factors under consideration are based on integration. It is important to note that in the present paper all econometric models are estimated on "pure" statistical data, while in many research papers on business and credit cycles all evaluations and inferences are based on "filtered" time series (mostly filtered by Hodrick-Prescott's method). In present paper "causality" always means "Granger causality". All estimations are made in gretl, an open-source multiplatform econometric software.

scholarly journals Credit Risk Determinants in Indonesia

2018 ◽  
Vol 1 (2) ◽  
pp. 106-115
Author(s):  
Amin Yusuf Efendi
Keyword(s):  
Time Series ◽  
Interest Rate ◽  
Credit Risk ◽  
Error Correction ◽  
Error Correction Model ◽  
Series Data ◽  
Short Term ◽  
Correction Model ◽  
Spurious Regression

Credit is the main business of the banking industry, therefore, in running the business, the bank is always overshadowed by the credit risk the which can be determined by the ratio of non-performing loans (NPL). The development of technology, finance digital brings the outside could impact on the financial industry both positive and negative. The purpose of this study was to analyze the interest rate, inflation, exchange rates, gross domestic product (GDP), a dummy finance digitalization policies in the long term and the short term of the non-performing loan (NPL) of conventional commercial banks in Indonesia The analytical method used in this research is-EG Error Correction Model (ECM), The Data used in this research is secondary quarterly time series data from the 2008 quarter 1-2017 4. The time series of data are not stationar Often that can cause spurious regression results, the exact models used is-EG Error Correction Model (ECM), This models may explain the behavior of short-term and long-term. The results Showed in the short-term variable interest rates significanly to non-performing loans, while in the long-term variable interest rate, exchange rate, and GDP Significantly, non-performing loans. Kredit merupakan bisnis utama dari industri perbankan, oleh karena itu dalam menjalankan bisnisnya, bank selalu dibayangi oleh risiko kredit yang dapat diketahui melalui rasio non-performing loans (NPL). Perkembangan teknologi, menghadirkan digital finance yang membawa dampak luar bisa terhadap industri keuangan baik positif dan negatif. Tujuan dari penelitian ini adalah untuk menganalisis suku bunga, inflasi, kurs, produk domestik bruto (PDB) dummy kebijakan digitalisasi keuangan dalam jangka panjang dan jangka pendek terhadap non-performing loan (NPL) bank umum konvensional di Indonesia  Metode analisis yang digunakan dalam penelitian ini adalah Error Correction Model-EG (ECM). Data yang digunakan dalam penelitian ini adalah data sekunder runtut waktu kuartalan dari 2008 kuartal 1 – 2017 kuartal 4. Data runtun waktu sering tidak stationar sehingga bisa menyebabkan hasil regresi palsu (spurious regression), Model yang tepat digunakan adalah Error Correction Model-EG (ECM), model ini dapat menjelaskan perilaku jangka pendek dan jangka panjang. Hasil penelitian menunjukkan dalam jangka pendek variabel suku bunga berpengaruh secara signifikan terhadap non performing loan, sedangkan dalam jangka panjang variabel suku bunga, kurs, dan PDB berpengaruh secara signifikan terhadap non perfoming loan.

scholarly journals Investigating the long-term evolution of subtropical ozone profiles applying ground-based FTIR spectrometry

2012 ◽  
Vol 5 (11) ◽  
pp. 2917-2931 ◽  
Author(s):  
O. E. García ◽  
M. Schneider ◽  
A. Redondas ◽  
Y. González ◽  
F. Hase ◽  
...  
Keyword(s):  
Time Series ◽  
Line Shape ◽  
Long Term Evolution ◽  
Term Evolution ◽  
Ozone Profile ◽  
Instrumental Line ◽  
Temperature Retrieval ◽  
Linear Trends ◽  
Better Than

Abstract. This study investigates the long-term evolution of subtropical ozone profile time series (1999–2010) obtained from ground-based FTIR (Fourier Transform InfraRed) spectrometry at the Izaña Observatory ozone super-site. Different ozone retrieval strategies are examined, analysing the influence of an additional temperature retrieval and different constraints. The theoretical assessment reveals that the FTIR system is able to resolve four independent ozone layers with a precision of better than 6% in the troposphere and of better than 3% in the lower, middle and upper stratosphere. This total error includes the smoothing error, which dominates the random error budget. Furthermore, we estimate that the measurement noise as well as uncertainties in the applied atmospheric temperature profiles and instrumental line shape are leading error sources. We show that a simultaneous temperature retrieval can significantly reduce the total random errors and that a regular determination of the instrumental line shape is important for producing a consistent long-term dataset. These theoretical precision estimates are empirically confirmed by daily intercomparisons with Electro Chemical Cell (ECC) sonde profiles. In order to empirically document the long-term stability of the FTIR ozone profile data we compare the linear trends and seasonal cycles as obtained from the FTIR and ECC time series. Concerning seasonality, in winter both techniques observe stratospheric ozone profiles that are typical middle latitude profiles (low tropopause, low ozone maximum concentrations) and in summer/autumn profiles that are typical tropical profiles (high tropopause, high maximum concentrations). The linear trends estimated from the FTIR and the ECC datasets agree within their error bars. For the FTIR time series, we observe a significant negative trend in the upper troposphere/lower stratosphere of about −0.2% yr−1 and a significant positive trend in the middle and upper stratosphere of about +0.3% yr−1 and +0.4% yr−1, respectively. Identifying such small trends is a difficult task for any measurement technique. In this context, super-sites applying different techniques are very important for the detection of reliable ozone trends.

Wage Net Discount Rates: 1981–2012

2014 ◽  
Vol 25 (2) ◽  
pp. 153-174 ◽  
Author(s):  
David Schap ◽  
Robert Baumann ◽  
Lauren Guest
Keyword(s):  
Time Series ◽  
Interest Rates ◽  
Discount Rate ◽  
Constant Term ◽  
Full Time ◽  
Discount Rates ◽  
Short Term ◽  
Treasury Securities ◽  
Short Run ◽  
Short Term Forecasting

Abstract The study explores time series properties of three wage net discount rate series derived using interest rates based on (alternatively) 1-year, 6-month and 3-month Treasury securities coupled with wage growth rates, initially for the period from 1981:01 to 2012:06, then subsequently through 2012:12. Stationarity tests are run on the full series and various sub-series to identify any portion of the series on which reliable forecasting can be based. Initially no support is found for the total offset hypothesis based on the full-time series (but support is subsequently found for total offset when exploring various data sub-series). Positive findings include that the three trended wage net growth rate series for the entire period under study are stationary, implying that reliable short-term forecasting of wage net discount rates is possible based on each of the trended series. Short-run forecasts based on the trended series are presented for 2012:07–2012:12 and compared to actual data in the period. Finally, the three trended wage net discount rate series are re-examined for 1981:01–2012:12, with short-term forecasting equations presented. Various sub-series of WNDRs are then explored in hopes of finding one or more that may be stationary about a constant term. Additional testing identifies three sub-series all ending 2012:12 with varying start dates that have desirable stationarity properties. The sub-series starting 2007:11 is highly stationary, but peculiar, with an associated constant WNDR that is negative and statistically different from zero; and the two sub-series beginning 1990:12 and 1994:05 have stationary attributes, yet possess constant terms that are slightly positive but not statistically different from zero, thus providing modest support for the total offset method.

scholarly journals NOAA-AVHRR Orbital Drift Correction: Validating Methods Using MSG-SEVIRI Data as a Benchmark Dataset

2021 ◽  
Vol 13 (5) ◽  
pp. 925
Author(s):  
Yves Julien ◽  
José A. Sobrino
Keyword(s):  
Time Series ◽  
Standard Deviation ◽  
Land Surface ◽  
Correction Method ◽  
Drift Correction ◽  
Noaa Avhrr ◽  
Coarse Spatial Resolution ◽  
Orbital Drift ◽  
Better Than

National Oceanic and Atmospheric Administration–Advanced Very High Resolution Radiometer (NOAA-AVHRR) data provides the possibility to build the longest Land Surface Temperature (LST) dataset to date, starting in 1981 up to the present. However, due to the orbital drift of the NOAA platforms, no LST dataset is available before 2000 and the arrival of newer platforms. Although numerous methods have been developed to correct this orbital drift effect on the LST, a lack of validation has prevented their application. This is the gap we bridge here by using the 15 min temporal resolution of Meteosat Second Generation–Spinning Enhanced Visible and Infra-Red Imager (MSG-SEVIRI) data to simulate drifted and reference LST time series. We then use these time series to validate an orbital drift correction method based on solar zenith angle (SZA) anomalies that we presented in a previous work (C1), as well as two variations of this approach (C0 and C2). Our results show that the C0 method performs better than the two others, although its overall bias absolute value ranges up to 1 K, while standard deviation values remain around 3 K. This is verified for most land covers, for all NOAA platforms, and these statistics remain mostly stable with noise on SZA time series (from 0° to ±10°). With this study, we show that orbital drift correction methods can be thoroughly validated and that such validation should aim toward bias absolute values below 0.1 K and standard deviation values around 1.4 K at coarse spatial resolution. To validate other orbital drift correction approaches, the drifted and reference time series used in this work are freely available for download from the first author’s webpage. This will be the first step toward the building of an orbital-drift-corrected long-term LST dataset.

scholarly journals The Dilemmas of Public Vs. Private Goods Discounting for Long-Term Investment Appraisal: The Puzzle of Citizen and Consumer Approaches to Valuation

2020 ◽  
Vol 20 (2) ◽  
pp. 114-133
Author(s):  
Monika Foltyn-Zarychta
Keyword(s):  
Discount Rate ◽  
Contingent Valuation Method ◽  
Discount Rates ◽  
Public And Private ◽  
Private Goods ◽  
Explanatory Variables ◽  
Investment Appraisal ◽  
Intertemporal Preferences ◽  
Use Values

Abstract Research background: An investment appraisal applies a single discount rate across all effects. However, this may be insufficient for heterogenous environmental impacts, mixing private and public goods as well as use and non-use values, where individuals may have multiple intertemporal preferences due to their duality to act as consumer or citizen. Purpose: The paper aims at identifying the scope of discrepancies in the level of discount rate for public and private as well as use-and non-use investment gains. Research methodology: The contingent valuation method is used to elicit stated discount rates for 2 hypothetical investments: environmental or financial gains to distinguish between public and private domain accompanied by two time-frames: short (use values) and long (non-use values). Results: The discount rate for the environment is lower than for money. It is also lower for the long-term horizon in comparison with the short-term perspective. The discrepancies are observed also for explanatory variables in respect to a socio-economic profile and attitude characteristics. Novelty: The paper adds to the discussion on valuation discrepancies between self-interested consumers and socially oriented citizens. The scarcity of previous research examining discount rates for public/private goods as well as the short/long-time horizon make the results relevant for public policy dealing with climate change and environmental protection, providing an insight into individual intertemporal preferences.

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