@article{guerron-quintana_inoue_kilian_2013, title={Frequentist inference in weakly identified dynamic stochastic general equilibrium models: Acronyms must be spelled out in titles for indexing purposes}, volume={4}, ISSN={["1759-7331"]}, DOI={10.3982/qe306}, abstractNote={A common problem in estimating dynamic stochastic general equilibrium models is that the structural parameters of economic interest are only weakly identified. As a result, classical confidence sets and Bayesian credible sets will not coincide even asymptotically, and the mean, mode, or median of the posterior distribution of the structural parameters can no longer be viewed as a consistent estimator. We propose two methods of constructing confidence intervals for structural model parameters that are asymptotically valid from a frequentist point of view regard- less of the strength of identification. One involves inverting a likelihood ratio test statistic, whereas the other involves inverting a Bayes factor statistic. A simula- tion study shows that both methods have more accurate coverage than alternative methods of inference. An empirical study of the degree of wage and price rigidi- ties in the U.S. economy illustrates that the data may contain useful information about structural model parameters even when these parameters are only weakly identified. Keywords. DSGE models, identification, inference, confidence sets, Bayes factor, likelihood ratio. JEL classification. C32, C52, E30, E50.}, number={2}, journal={QUANTITATIVE ECONOMICS}, author={Guerron-Quintana, Pablo and Inoue, Atsushi and Kilian, Lutz}, year={2013}, month={Jul}, pages={197–229} }
 @article{inoue_2012, title={MEAN-PLUS-NOISE FACTOR MODELS: AN EMPIRICAL EXPLORATION}, volume={63}, ISSN={["1468-5876"]}, DOI={10.1111/j.1468-5876.2012.00582.x}, abstractNote={In this paper I propose an alternative factor model whose common factor follows a mean‐plus‐noise process. While the existing methods for factor models should be valid for this model, their performance may be misleading in small samples. Because the likelihood function of this model is not tractable, I estimate this model by Bayesian methods. When applied to US macroeconomic time series, we find that the estimated mean‐plus‐noise factor is useful for predicting real personal income, industrial production and unemployment at long prediction horizons.}, number={3}, journal={JAPANESE ECONOMIC REVIEW}, author={Inoue, Atsushi}, year={2012}, month={Sep}, pages={289–309} }
 @article{rossi_inoue_2012, title={Out-of-Sample Forecast Tests Robust to the Choice of Window Size}, volume={30}, ISSN={["1537-2707"]}, DOI={10.1080/07350015.2012.693850}, abstractNote={This article proposes new methodologies for evaluating economic models’ out-of-sample forecasting performance that are robust to the choice of the estimation window size. The methodologies involve evaluating the predictive ability of forecasting models over a wide range of window sizes. The study shows that the tests proposed in the literature may lack the power to detect predictive ability and might be subject to data snooping across different window sizes if used repeatedly. An empirical application shows the usefulness of the methodologies for evaluating exchange rate models’ forecasting ability.}, number={3}, journal={JOURNAL OF BUSINESS & ECONOMIC STATISTICS}, author={Rossi, Barbara and Inoue, Atsushi}, year={2012}, month={Jul}, pages={432–453} }
 @article{inoue_rossi_2011, title={Testing for weak identification in possibly nonlinear models}, volume={161}, ISSN={["1872-6895"]}, DOI={10.1016/j.jeconom.2010.12.012}, number={2}, journal={JOURNAL OF ECONOMETRICS}, author={Inoue, Atsushi and Rossi, Barbara}, year={2011}, month={Apr}, pages={246–261} }
 @article{inoue_rossi_2011, title={IDENTIFYING THE SOURCES OF INSTABILITIES IN MACROECONOMIC FLUCTUATIONS}, volume={93}, ISSN={["1530-9142"]}, DOI={10.1162/rest_a_00130}, abstractNote={Abstract This paper investigates the sources of the substantial decrease in output growth volatility in the mid-1980s by identifying which of the structural parameters in a representative New Keynesian and structural VAR models changed. Overturning conventional wisdom, we show that the Great Moderation was due not only to changes in shock volatilities but also to changes in monetary policy parameters, as well as in the private sector's parameters. The Great Moderation was previously attributed to good luck because the alternative sources of instabilities appear to have offsetting effects on output volatility and therefore were impossible to detect using existing techniques.}, number={4}, journal={REVIEW OF ECONOMICS AND STATISTICS}, author={Inoue, Atsushi and Rossi, Barbara}, year={2011}, month={Nov}, pages={1186–1204} }
 @article{inoue_solon_2010, title={TWO-SAMPLE INSTRUMENTAL VARIABLES ESTIMATORS}, volume={92}, ISSN={["1530-9142"]}, DOI={10.1162/rest_a_00011}, abstractNote={Following an influential article by Angrist and Krueger (1992) on two-sample instrumental variables (TSIV) estimation, numerous empirical researchers have applied a computationally convenient two-sample two-stage least squares (TS2SLS) variant of Angrist and Krueger's estimator. In the two-sample context, unlike the single-sample situation, the IV and 2SLS estimators are numerically distinct. We derive and compare the asymptotic distributions of the two estimators and find that the commonly used TS2SLS estimator is more asymptotically efficient than the TSIV estimator. We also resolve some confusion in the literature about how to estimate standard errors for the TS2SLS estimator.}, number={3}, journal={REVIEW OF ECONOMICS AND STATISTICS}, author={Inoue, Atsushi and Solon, Gary}, year={2010}, month={Aug}, pages={557–561} }
 @article{inoue_kilian_kiraz_2009, title={Do Actions Speak Louder Than Words ? Household Expectations of Inflation Based on Micro Consumption Data}, volume={41}, ISSN={["1538-4616"]}, DOI={10.1111/j.1538-4616.2009.00259.x}, abstractNote={Survey data on household expectations of inflation are routinely used in economic analysis, yet it is not clear how accurately households are able to articulate their expectations in survey interviews. We propose an alternative approach to recovering households' expectations of inflation from their consumption expenditures. We show that these expectations measures have predictive power for consumer price index (CPI) inflation. They are better predictors of CPI inflation than household survey responses and more highly correlated with professional inflation forecasts, except for highly educated consumers, consistent with the view that more educated consumers are better able to articulate their expectations. We also document that households' inflation expectations respond to inflation news, as measured by the unpredictable component of inflation predictions in the Survey of Professional Forecasters. The response to inflation news tends to increase with households' level of education, consistent with the existence of constraints on household's ability to process this information.}, number={7}, journal={JOURNAL OF MONEY CREDIT AND BANKING}, author={Inoue, Atsushi and Kilian, Lutz and Kiraz, Fatma Burcu}, year={2009}, month={Oct}, pages={1331–1363} }
 @article{inoue_kilian_2008, title={How useful is bagging in forecasting economic time series? A case study of US consumer price inflation}, volume={103}, ISSN={["0162-1459"]}, DOI={10.1198/016214507000000473}, abstractNote={This article focuses on the widely studied question of whether the inclusion of indicators of real economic activity lowers the prediction mean squared error of forecasting models of U.S. consumer price inflation. We propose three variants of the bagging algorithm specifically designed for this type of forecasting problem and evaluate their empirical performance. Although bagging predictors in our application are clearly more accurate than equally weighted forecasts, median forecasts, ARM forecasts, AFTER forecasts, or Bayesian forecast averages based on one extra predictor at a time, they are generally about as accurate as the Bayesian shrinkage predictor, the ridge regression predictor, the iterated LASSO predictor, or the Bayesian model average predictor based on random subsets of extra predictors. Our results show that bagging can achieve large reductions in prediction mean-squared errors even in such challenging applications as inflation forecasting; however, bagging is not the only method capable of achieving such gains.}, number={482}, journal={JOURNAL OF THE AMERICAN STATISTICAL ASSOCIATION}, author={Inoue, Atsushi and Kilian, Lutz}, year={2008}, month={Jun}, pages={511–522} }
 @article{hall_inoue_2007, title={The large sample behaviour of the generalized method of moments estimator in misspecified models (vol 114, pg 361, 2003)}, volume={141}, ISSN={["0304-4076"]}, DOI={10.1016/j.jeconom.2007.02.006}, number={2}, journal={JOURNAL OF ECONOMETRICS}, author={Hall, Alastair R. and Inoue, Atsushi}, year={2007}, month={Dec}, pages={1418–1418} }
 @article{hall_inoue_jana_shin_2007, title={Information in generalized method of moments estimation and entropy-based moment selection}, volume={138}, ISSN={["0304-4076"]}, DOI={10.1016/j.jeconom.2006.05.006}, abstractNote={In this paper, we make five contributions to the literature on information and entropy in generalized method of moments (GMM) estimation. First, we introduce the concept of the long run canonical correlations (LRCCs) between the true score vector and the moment function f(vt,θ0) and show that they provide a metric for the information contained in the population moment condition E[f(vt,θ0)]=0. Second, we show that the entropy of the limiting distribution of the GMM estimator can be written in terms of these LRCCs. Third, motivated by the above results, we introduce an information criterion based on this entropy that can be used as a basis for moment selection. Fourth, we introduce the concept of nearly redundant moment conditions and use it to explore the connection between redundancy and weak identification. Fifth, we analyse the behaviour of the aforementioned entropy-based moment selection method in two scenarios of interest; these scenarios are: (i) nonlinear dynamic models where the parameter vector is identified by all the combinations of moment conditions considered; (ii) linear static models where the parameter vector may be weakly identified for some of the combinations considered. The first of these contributions rests on a generalized information equality that is proved in the paper, and may be of interest in its own right.}, number={2}, journal={JOURNAL OF ECONOMETRICS}, author={Hall, Alastair R. and Inoue, Atsushi and Jana, Kalidas and Shin, Changmock}, year={2007}, month={Jun}, pages={488–512} }
 @article{inoue_vukina_2006, title={Testing for the principal's monopsony power in agency contracts}, volume={31}, ISSN={["0377-7332"]}, DOI={10.1007/s00181-005-0041-6}, number={3}, journal={EMPIRICAL ECONOMICS}, author={Inoue, Atsushi and Vukina, Tomislav}, year={2006}, month={Sep}, pages={717–734} }
 @article{inoue_shintani_2006, title={Bootstrapping GMM estimators for time series}, volume={133}, ISSN={["0304-4076"]}, DOI={10.1016/j.jeconom.2005.06.004}, abstractNote={This paper considers the bootstrap for the GMM estimator of overidentified linear models when autocorrelation structures of moment functions are unknown. When moment functions are uncorrelated after finite lags, Hall and Horowitz, [1996. Bootstrap critical values for tests based on generalized method of moments estimators. Econometrica 64, 891–916] showed that errors in the rejection probabilities of the bootstrap tests are o(T-1). However, this rate cannot be obtained with the HAC covariance matrix estimator since it converges at a nonparametric rate. By incorporating the HAC covariance matrix estimator in the Edgeworth expansion of the distribution, we show that the bootstrap provides asymptotic refinements when the characteristic exponent of the kernel function is greater than two.}, number={2}, journal={JOURNAL OF ECONOMETRICS}, author={Inoue, Atsushi and Shintani, Mototsugu}, year={2006}, month={Aug}, pages={531–555} }
 @article{inoue_kilian_2006, title={On the selection of forecasting models}, volume={130}, ISSN={["1872-6895"]}, DOI={10.1016/j.jeconom.2005.03.003}, abstractNote={It is standard in applied work to select forecasting models by ranking candidate models by their prediction mean squared error (PMSE) in simulated out-of-sample (SOOS) forecasts. Alternatively, forecast models may be selected using information criteria (IC). We compare the asymptotic and finite-sample properties of these methods in terms of their ability to mimimize the true out-of-sample PMSE, allowing for possible misspecification of the forecast models under consideration. We show that under suitable conditions the IC method will be consistent for the best approximating model among the candidate models. In contrast, under standard assumptions the SOOS method, whether based on recursive or rolling regressions, will select overparameterized models with positive probability, resulting in excessive finite-sample PMSEs.}, number={2}, journal={JOURNAL OF ECONOMETRICS}, author={Inoue, A and Kilian, L}, year={2006}, month={Feb}, pages={273–306} }
 @article{inoue_rossi_2005, title={Recursive predictability tests for real-time data}, volume={23}, ISSN={["1537-2707"]}, DOI={10.1198/073500104000000668}, abstractNote={We propose a sequential test for predictive ability for recursively assessing whether some economic variables have explanatory content for another variable. In the forecasting literature it is common to assess predictive ability by using “one-shot” tests at each estimation period. We show that this practice leads to size distortions, selects overfitted models and provides spurious evidence of in-sample predictive ability, and may lower the forecast accuracy of the model selected by the test. The usefulness of the proposed test is shown in well-known empirical applications to the real-time predictive content of money for output and the selection between linear and nonlinear models.}, number={3}, journal={JOURNAL OF BUSINESS & ECONOMIC STATISTICS}, author={Inoue, A and Rossi, B}, year={2005}, month={Jul}, pages={336–345} }
 @article{hall_inoue_peixe_2003, title={Covariance matrix estimation and the limiting behavior of the overidentifying restrictions test in the presence of neglected structural instability}, volume={19}, ISSN={["0266-4666"]}, DOI={10.1017/S0266466603196041}, abstractNote={We consider the limiting behavior of the overidentifying restrictions test in the presence of neglected structural instability at a single “break point.” It is shown that the test need not be consistent against this type of misspecification. If it is consistent then it emerges that the limiting behavior of this test statistic depends on the covariance matrix estimator employed. In this paper we consider the case in which a heteroskedasticity autocorrelation covariance (HAC) is used. It is shown that (i) if the HAC estimator is based on uncentered autocovariances then the overidentifying restrictions test diverges at rate T/bT where T is the sample size and bT is the bandwidth; (ii) if the HAC estimator is based on centered autocovariances then the rate of increase of the overidentifying restrictions test is either T/bT or T depending on the form of the instability. These results are used to provide conditions for the consistency of the method of moment selection of Andrews (1999, Econometrica 67, 543–564) when certain elements of the candidate set of moments are misspecified as a result of neglected structural instability.This work was begun while Hall was a Senior Research Fellow and Peixe was a graduate student at the Department of Economics, University of Birmingham, UK, and this support is gratefully acknowledged. Peixe also gratefully acknowledges financial support from FCT under Grant PRAXIS XXI/BD/13453/97. We are very grateful for the very useful comments of Don Andrews and two anonymous referees.}, number={6}, journal={ECONOMETRIC THEORY}, author={Hall, AR and Inoue, A and Peixe, FPM}, year={2003}, month={Dec}, pages={962–983} }
 @article{inoue_kilian_2003, title={The continuity of the limit distribution in the parameter of interest is not essential for the validity of the bootstrap}, volume={19}, ISSN={["0266-4666"]}, DOI={10.1017/S026646660319603X}, abstractNote={It is well known that the unrestricted bootstrap estimator of the slope parameter in the random walk model without drift converges to a random distribution. This bootstrap failure is commonly attributed to the discontinuity of the limit distribution of the least-squares estimator in the parameter of interest. We demonstrate by counterexample that this type of continuity is not essential for the validity of the bootstrap nor is it essential that the rate of convergence of the estimator remain constant over the whole parameter space.We thank Don Andrews, Shinichi Sakata, Jonathan Wright, and two anonymous referees for very helpful comments. The views expressed in this paper do not necessarily reflect those of the European Central Bank or its members.}, number={6}, journal={ECONOMETRIC THEORY}, author={Inoue, A and Kilian, L}, year={2003}, month={Dec}, pages={944–961} }
 @article{hall_inoue_2003, title={The large sample behaviour of the generalized method of moments estimator in misspecified models}, volume={114}, ISSN={["0304-4076"]}, DOI={10.1016/S0304-4076(03)00089-7}, abstractNote={This paper presents the limiting distribution theory for the GMM estimator when the estimation is based on a population moment condition which is subject to non-local (or fixed) misspecification. It is shown that if the parameter vector is overidentified then the weighting matrix plays a far more fundamental role than it does in the corresponding analysis for correctly specified models. Specifically, the rate of convergence of the estimator depends on the rate of convergence of the weighting matrix to its probability limit. The analysis is presented for four particular choices of weighting matrix which are commonly used in practice. In each case the limiting distribution theory is different, and also different from the limiting distribution in a correctly specified model. Statistics are proposed which allow the researcher to test hypotheses about the parameters in misspecified models.}, number={2}, journal={JOURNAL OF ECONOMETRICS}, author={Hall, AR and Inoue, A}, year={2003}, month={Jun}, pages={361–394} }
 @article{inoue_kilian_2002, title={Bootstrapping autoregressive processes with possible unit roots}, volume={70}, ISSN={["0012-9682"]}, DOI={10.1111/1468-0262.00281}, abstractNote={An important question in applied work is how to bootstrap autoregressive processes involving highly persistent time series of unknown order of integration. In this paper, we show that in many cases of interest in applied work the standard bootstrap algorithm for unrestricted autoregressions remains valid for processes with exact unit roots; no pre-tests are required, at least asymptotically, and applied researchers may proceed as in the stationary case. Specifically, we prove the first-order asymptotic validity of bootstrapping any linear combination of the slope parameters in autoregressive models with drift. We also establish the bootstrap validity for the marginal distribution of slope parameters and for most linear combinations of slope parameters in higher-order autoregressions without drift. The latter result is in sharp contrast to the well-known bootstrap invalidity result for the random walk without drift. A simulation study examines the finite-sample accuracy of the bootstrap approximation both for integrated and for near-integrated processes. We find that in many, but not all circumstances, the bootstrap distribution closely approximates the exact finite-sample distribution.}, number={1}, journal={ECONOMETRICA}, author={Inoue, A and Kilian, L}, year={2002}, month={Jan}, pages={377–391} }
 @article{inoue_kilian_2002, title={Bootstrapping smooth functions of slope parameters and innovation variances in VAR(infinity) models}, volume={43}, ISSN={["0020-6598"]}, DOI={10.1111/1468-2354.t01-1-00016}, abstractNote={It is common to conduct bootstrap inference in vector autoregressive (VAR) models based on the assumption that the underlying data‐generating process is of finite‐lag order. This assumption is implausible in practice. We establish the asymptotic validity of the residual‐based bootstrap method for smooth functions of VAR slope parameters and innovation variances under the alternative assumption that a sequence of finite‐lag order VAR models is fitted to data generated by a VAR process of possibly infinite order. This class of statistics includes measures of predictability and orthogonalized impulse responses and variance decompositions. Our approach provides an alternative to the use of the asymptotic normal approximation and can be used even in the absence of closed‐form solutions for the variance of the estimator. We illustrate the practical relevance of our findings for applied work, including the evaluation of macroeconomic models.}, number={2}, journal={INTERNATIONAL ECONOMIC REVIEW}, author={Inoue, A and Kilian, L}, year={2002}, month={May}, pages={309–331} }
 @article{inoue_2002, title={Identifying the sign of the slope of a monotonic function via OLS}, volume={75}, ISSN={["0165-1765"]}, DOI={10.1016/S0165-1765(02)00002-2}, abstractNote={Abstract This paper derives a necessary and sufficient condition for identifying the sign of the derivative of an unknown monotonic function by the method of weighted average derivatives. While OLS has a weighted average derivative representation, it does not necessarily satisfy the condition except for restrictive cases.}, number={3}, journal={ECONOMICS LETTERS}, author={Inoue, A}, year={2002}, month={May}, pages={419–424} }
 @article{diebold_inoue_2001, title={Long memory and regime switching}, volume={105}, ISSN={["0304-4076"]}, DOI={10.1016/S0304-4076(01)00073-2}, abstractNote={The theoretical and empirical econometric literatures on long memory and regime switching have evolved largely independently, as the phenomena appear distinct. We argue, in contrast, that they are intimately related, and we substantiate our claim in several environments, including a simple mixture model, Engle and Smith's (Rev. Econom. Statist. 81 (1999) 553–574) stochastic permanent break model, and Hamilton's (Econometrica 57 (1989) 357–384) Markov-switching model. In particular, we show analytically that stochastic regime switching is easily confused with long memory, even asymptotically, so long as only a “small” amount of regime switching occurs, in a sense that we make precise. A Monte Carlo analysis supports the relevance of the theory and produces additional insights.}, number={1}, journal={JOURNAL OF ECONOMETRICS}, author={Diebold, FX and Inoue, A}, year={2001}, month={Nov}, pages={131–159} }
 @article{inoue_2001, title={Testing for distributional change in time series}, volume={17}, ISSN={["0266-4666"]}, DOI={10.1017/S0266466601171057}, abstractNote={This paper proposes nonparametric tests of change in the 
distribution function of a time series. The limiting null 
distributions of the test statistics depend on a nuisance 
parameter, and critical values cannot be tabulated a priori. 
To circumvent this problem, a new simulation-based statistical 
method is developed. The validity of our simulation procedure 
is established in terms of size, local power, and test consistency. 
The finite-sample properties of the proposed tests are evaluated 
in a set of Monte Carlo experiments, and the distributional 
stability in financial markets is examined.}, number={1}, journal={ECONOMETRIC THEORY}, author={Inoue, A}, year={2001}, month={Feb}, pages={156–187} }
 @article{inoue_1999, title={Tests of cointegrating rank with a trend-break}, volume={90}, ISSN={["0304-4076"]}, DOI={10.1016/S0304-4076(98)00042-6}, abstractNote={The conventional testing procedure may mislead one into accepting the null of no cointegration or the null of a cointegrating rank smaller than the true rank when there is a trend-break under the alternative hypothesis. This paper proposes tests for cointegrating rank that have power against the trend-break alternative. The proposed tests are applied to the US money demand function. The results support the Campbell–Perron conjecture: money, income and interest rates are cointegrated around a broken trend.}, number={2}, journal={JOURNAL OF ECONOMETRICS}, author={Inoue, A}, year={1999}, month={Jun}, pages={215–237} }