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Macro Forecasts by Use of a Nonparametric Monetary Aggregate

Author

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  • Hyung-Sik Harris Kim

    (The Bank of Korea)

Abstract

Since neither the conventional simple sum aggregates which do not consider the user cost of the interest rate elasticity, nor the theoretically preferred approach, the Divisia index, which considers the optimizing behavior of economic agents, performs as well as expected in econometric studies, estimation, and forecasting. I propose an alternative aggregate, HM, by applying a nonparametric estimation. This paper shows HM performs bettern than the other two monetary aggregates in forecasting major economic variables such as real GDP growth rate, inflation, and changes in interest rate.

Suggested Citation

  • Hyung-Sik Harris Kim, 2003. "Macro Forecasts by Use of a Nonparametric Monetary Aggregate," Korean Economic Review, Korean Economic Association, vol. 19, pages 169-190.
    • Handle: RePEc:kea:keappr:ker-200306-19-1-08
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    More about this item

    Keywords

    Monetary aggregates; forecasting; nonparametric estimation;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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