Summer School Brussels - Edition 2024

Monitoring and Forecasting Macroeconomic and Financial Risk

So.Fi.E. Summer School

September 09-13 2024, Brussels, Belgium

This course explores econometric methods for monitoring and forecasting macroeconomic and financial risks, conditional upon current and past indicators of economic and financial conditions. Initially, the course introduces the Growth-at-Risk framework, which uses quantile regression to gauge downside risks by projecting GDP growth based on these indicators. It covers all steps of operationalization, including interpolation from quantiles to densities, measurement of shortfall, out-of-sample evaluation of density forecasts with a focus on real-time performance, and forecast combination. Subsequently, we cover other target variables including the general outlook at risk, inflation at risk, employment at risk, housing at risk, and stock market at risk, as well as other methods including distributional regression, nonparametric density estimation, mean-variance regression, and Markov-switching models. Practical applications relevant to the US and the Euro Area will be developed and discussed using MATLAB.

The course concludes with a workshop where leading scholars in the fields of macroeconomics, finance, and data science will present their ongoing work on monitoring and forecasting risk. Presenters/discussants include: Nina Boyarchenko (New York Fed), Gianluca Bontempi (ULB), Christian Brownlees (UPF and BSE), Christophe Croux (KULeuven), Christine De Mol (ULB), Catherine Doz (Paris School of Economics), Fernando Duarte (Brown University), Gary Koop (University of Strathclyde), Michele Lenza (European Central Bank), Francesca Loria (Federal Reserve Board), Haroon Mumtaz (Queen Mary, University of London), Emanuel Moench (Frankfurt School of Finance & Management), Francesca Monti (UCLouvain), Andrea de Polis (University of Strathclyde), Jean-Paul Renne (HEC Lausanne), Andrej Sokol (Bloomberg LP), and Dick Van Dijk (Erasmus University Rotterdam).

The audience includes graduate students, academics, practitioners, and policymakers. Apply here.

Instructors

Domenico Giannone

Domenico Giannone is an Assistant Director at International Monetary Fund (IMF), an Affiliate Professor at the University of Washington, a Fellow of the International Association of Applied Econometrics (IAAE), and a Research Fellow of the Centre for European Policy Research (CEPR). His general fields of research are macroeconometrics, time series econometrics, forecasting, monetary policy, and business cycles. Before joining the IMF, he was Senior Principal Economist at Amazon.com, Assistant Vice President at the Federal Reserve Bank of New York, Professor of Economics at the Université libre de Bruxelles and LUISS University of Rome, Economist at the European Central Bank (ECB), and visiting Lecturer at Columbia University, Harvard University, London Business School, and the Graduate Institute of Geneva. He was a member of the CEPR Business Cycle Dating Committee and Founder and Director of Nowcasting.com. He holds a Ph.D. from the Université libre de Bruxelles, 2004.

Francesco Furno

Francesco is an Economist in the Forecasting team of Amazon Web Services (AWS), the cloud-computing division of Amazon.com. At AWS, he focuses on forecasting and on the connection between macroeconomic developments and the IT sector. Francesco holds a Ph.D. in Economics from New York University (2022) and his academic research interests are macroeconomics, time-series, and fiscal policy.

Schedule
(detailed full program)

Monday

Lecture: Monitoring and forecasting risk with quantile regressions.

Applications: Estimation of outlook-at-risk in the US and the Euro Area. Focus on GDP growth and other variables such as investment, inflation, and unemployment. Measuring risk with expected shortfall/long-rise, value-at-risk.

References: Adrian, Boyarchenko, Giannone (2019); Figueres, Jarocinski (2020); Amburgey, McCracken (2023); Adams, Adrian, Boyarchenko, Giannone (2021); Boyarchenko, Crump, Elias, Lopez Gaffney (2023); Scotti (2023).

Tuesday

Lecture: Evaluation of density forecasts in real-time.

Applications: Evaluation of risk predictions in real-time: predictive scores, calibration, sharpness. Combination of density forecasts.

References: Adams, Adrian, Boyarchenko, Giannone (2021); Amburgey and McCracken (2023); Amisano, Giacomini (2007); Conflitti, De Mol and Giannone (2015); Crump, Everaert, Giannone, Hundtofte (2024); Gneiting and Raftery (2007); Rossi, Sekhposyan (2019).

Wednesday

Lecture: Alternative methods to forecasting risk: distributional regression, nonparametric density estimation, mean-variance regression, and Markov-switching model.

Applications: Estimation of recession risk in the US and the Euro Area.

References: Peracchi (2002); Furno, Giannone (2024); Filardo (1994), Racine and Li (2023), Adrian, Boyarchenko, Giannone (2019); Adrian, Boyarchenko, Giannone (2021).

Presentations of selected participants

Thursday (Morning)

Lecture: Multivariate model with endogenous risk.

References: Adrian, Boyarchenko, Giannone (2021).

Bloomberg applications, by Andrej Sokol (Bloomberg)

Thursday (Afternoon) - Friday

Workshop

Topics covered: Growth-at-Risk and markov switching, vector autoregressive models with volatility in mean, real-Time prediction of macroeconomic and financial risk, economic activity, predictive density combination, natural disasters as macroeconomic tail risks, risk and monetary policy in data-rich setting, etc.

Participants: Nina Boyarchenko (New York Fed), Gianluca Bontempi (ULB), Christian Brownlees (UPF and BSE), Christophe Croux (KULeuven), Christine De Mol (ULB), Catherine Doz (Paris School of Economics), Fernando Duarte (Brown University), Gary Koop (University of Strathclyde), Michele Lenza (European Central Bank), Francesca Loria (Federal Reserve Board), Haroon Mumtaz (Queen Mary, University of London), Emanuel Moench (Frankfurt School of Finance & Management), Francesca Monti (UCLouvain), Andrea de Polis (University of Strathclyde), Jean-Paul Renne (HEC Lausanne), Andrej Sokol (Bloomberg LP), and Dick Van Dijk (Erasmus University Rotterdam).

Panel Discussion

Moderator: Domenico Giannone

Participants: Michele Lenza, Nina Boyarchenko, Emanuel Moench, Francesca Monti

Key reference

Adams, P., Adrian, T., Boyarchenko, N., and Giannone, D., 2021."Forecasting macroeconomic risks," International Journal of Forecasting, Elsevier, vol. 37(3), pp 1173-1191.
Adrian, T., Boyarchenko, N. and Giannone, D., 2019. Vulnerable growth. American Economic Review, 109(4), pp.1263-1289.
Adrian, T., Boyarchenko, N. and Giannone, D., 2021. "Multimodality In Macrofinancial Dynamics," International Economic Review, Department of Economics, vol. 62(2), pp 861-886.
Aaron J. Amburgey & Michael W. McCracken, 2023 "On the real‐time predictive content of financial condition indices for growth," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(2), pages 137-163, March.
Boyarchenko, N., Crump, R., Elias, L., and Lopez Gaffney, I., 2023."What Is “Outlook-at-Risk?” Liberty Street Economics 20230215, Federal Reserve Bank of New York.
Conflitti, Cristina & De Mol, Christine & Giannone, Domenico, 2015. "Optimal combination of survey forecasts," International Journal of Forecasting, Elsevier, vol. 31(4), pages 1096-1103.
Crump, R., Everaert, M., Giannone, D., and Hundtofte, S. (2024). “Changing risk-return profiles,” to appear in A Festschrift for Marc Hallin, eds. M. Barigozzi and D. Paindaveine.
Figueres, J.M. and Jarociński, M., 2020. Vulnerable growth in the euro area: Measuring the financial conditions. Economics Letters, 191, p.109-126.
Filardo, A., 1994. "Business Cycle Phases and Their Transitional Dynamics," Journal of Business and Economic Statistics, vol 12(3), pp 299-230.
Furno, F. and Giannone, D. 2024. “Nowcasting Recession Risk,” Handbook of Macroeconomic Forecasting, eds., A. Galvao and M. Clemens, forthcoming
Peracchi, F., 2002. On estimating conditional quantiles and distribution functions. Computational statistics & data analysis, 38(4), pp.433-447.
Li, Q. and Racine, J.S., 2023. Nonparametric econometrics: theory and practice. Princeton University Press
Scotti, C., 2023. Financial Shocks in an Uncertain Economy.

How to participate?

To participate, please submit your application to Prof. Leonardo Iania at leonardo.iania@uclouvain.be by the 14th of July, with the words “SoFiE Summer School 2024’’ in the subject box. Decisions will be emailed out by the 20th of July 2024. The applications should include a CV and, in the text of the email, a brief motivation on why you would like to attend this course. The course will offer a limited number of course participants an opportunity to present their current research and receive feedback from the instructors and other course participants. There will be both short presentations and poster sessions. Students interested in making a presentation/poster (which is optional) should indicate so on their application and submit a draft of the research paper that they wish to promote. Students who are selected to make a presentation/poster will be informed at the same time as they receive their admission decisions.

Fees: 400 Euro for (full-time) Ph.D. students, 600 for (full time) academics (Post-docs, Profs, etc.) and 1100 Euro for others. All accepted participants are expected to be members of the Society for Financial Econometrics or to join before their place is confirmed. The course is free for the members of the organising institutions. Further info on how to join SoFiE is available at http://sofie.stern.nyu.edu/membership (where a student membership option is available). Fees cover the inscription costs, lunches, and coffee breaks foreseen in the program. Confirmation of admission of selected applicants is conditional on receipt of the fee payment in due time (details to be provided in the admission email).