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9. The Stock and Watson (2007) study compares forecasts using different models for inflation between the early period (1970-1983) and the latter period (1984-2004). Describe
9. The Stock and Watson (2007) study compares forecasts using different models for inflation between the early period (1970-1983) and the latter period (1984-2004). Describe three results from the study? (10 points) iii) All models can forecast the latter period better than the earlier period (2 points) The models have worse performance to estimate the Phillips Curve in the second period when compared to the earlier period (2 points) c) The Unobserved Components-Stochastic Volatility model has the lowest forecast error and shows a large permanent shock in the early period. It is also finds the Philips Curve to be stable over the two periods. (6 points) ( 9. The Stock and Watson (2007) study compares forecasts using different models for inflation between the early period (1970-1983) and the latter period (1984-2004). Describe three results from the study? (10 points) iii) All models can forecast the latter period better than the earlier period (2 points) The models have worse performance to estimate the Phillips Curve in the second period when compared to the earlier period (2 points) c) The Unobserved Components-Stochastic Volatility model has the lowest forecast error and shows a large permanent shock in the early period. It is also finds the Philips Curve to be stable over the two periods. (6 points) (
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