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This paper proposes a new methodology to study sequential corpora by implementing a two-stage algorithm that learns time-based topics with respect to a scale of document positions and introduces the concept of Topic Scaling, which ranks learned topics within the same document scale. The first stage ranks documents using Wordfish, a Poisson-based document-scaling method, to estimate document positions that serve, in the second stage, as a dependent variable to learn relevant topics via a supervised Latent Dirichlet Allocation. This novelty brings two innovations in text mining as it explains document positions, whose scale is a latent variable, and ranks the inferred topics on the document scale to match their occurrences within the corpus and track their evolution. Tested on the U.S. State Of The Union two-party addresses, this inductive approach reveals that each party dominates one end of the learned scale with interchangeable transitions that follow the parties’ term of office, while it shows for the corpus of German economic forecasting reports a shift in the narrative style adopted by economic institutions following the 2008 financial crisis. Besides a demonstrated high accuracy in predicting in-sample document positions from topic scores, this method unfolds further hidden topics that differentiate similar documents by increasing the number of learned topics to expand potential nested hierarchical topic structures. Compared to other popular topic models, Topic Scaling learns topics with respect to document similarities without specifying a time frequency to learn topic evolution, thus capturing broader topic patterns than dynamic topic models and yielding more interpretable outputs than a plain Latent Dirichlet Allocation.

We investigate determinants of disagreement—cross-sectional dispersion of individual forecasts—about key economic indicators. Disagreement about economic activity, in particular about GDP growth, has a distinct dynamic from disagreement about prices: inflation and interest rates. Disagreement about GDP growth intensifies strongly during recessions. Disagreement about prices rises with their level, declines under independent central banks, and both its level and its sensitivity to macroeconomic variables are larger in countries where central banks became independent only around the mid-1990s. Our findings suggest that credible monetary policy contributes to anchoring of expectations about inflation and interest rates. Disagreement for both groups of indicators increases with uncertainty about the actual series.

We investigate convergence in European price level, unit labour cost, income and productivity data over the period of 1960–2006 using the non-linear time-varying coefficients factor model proposed by Philips and Sul (2007 Econometrica 75:1771–1855). This approach is extremely flexible in order to model a large number of transition paths to convergence. We find regional clusters in consumer price level data. GDP deflator data and unit labor cost data are far less clustered than CPI data. Income per capita data indicate the existence of three convergence clubs without strong regional linkages; Italy and Germany are not converging to any of those clubs. Total factor productivity data indicate the existence of a small club including fast-growing countries and a club consisting of all other countries.

We analyse forecasts of professional forecasters for Germany regarding the time span from 1970 to 2004. This novel panel data set renders it possible to assess the accuracy and efficiency of growth and inflation forecasts more efficiently than in previous studies. We argue that the forecasts are, on average, unbiased and weakly--but not strongly--efficient. Using model confidence sets suggested by Hansen et al. (2004), we find that, besides the effect of diverging forecasting dates, no other substantial differences in forecasting quality among forecasters exist. Nevertheless, on the basis of a direction-of-change analysis we argue that it is not always advisable to listen to the majority of forecasters. [PUBLICATION ABSTRACT]

Recent price developments in the euro area demonstrate that deflation is a serious issue of concern. Some euro area countries are already facing a deflation in the usual macroeconomic sense of a 'general price decline'. This article discusses the economic consequences of deflation and suggests that the ECB's expansionary monetary policy was inevitable.

This paper addresses the long-term slowdown in labour productivity for a panel of 25 countries. First, we look at productivity shifts and trends based on structural break tests and modern filtering techniques. The productivity slowdown is evident in almost all countries we investigate. Second, we deepen the analysis by decomposing labour productivity growth. Third, we use dynamic models to test for Granger causality in the trends and find that there is strong evidence that a slow GDP growth trend causes the subsequent productivity trend. We conclude that the productivity slowdown is a global phenomenon and should therefore be tackled at the international level.

This paper compares relative unit labor cost developments in the countries of the euro area since the beginning of the European Monetary Union (EMU) both with historical developments and with intraregional developments in the United States and Germany. Unit labor cost indices for the U.S. states and census regions from 1977 to 1997 as well as for the German Länder from 1970 to 2004 have been constructed. It is found that unit labor cost increases since 1999 in Portugal, and to a lesser extent, in Spain and Greece can be judged as excessive, which might impair a smooth working of the EMU in the future.

We estimate the Sticky Information Phillips Curve model of Mankiw and Reis (2002) using survey expectations of professional forecasters from four major European economies. Our estimates imply that inflation expectations in France, Germany, and the United Kingdom are updated about once a year, while in Italy, about once each 6 months.

Using unit labor cost (ULC) data from Euro area countries as well as US States and German Länder we investigate inflation convergence using different approaches, namely panel unit root tests, cointegration tests and error-correction models. All in all we cannot reject convergence of ULC growth in EMU. However, country-specific deviations from the rest of the currency union are much more pronounced and much more persistent in Europe than in the US or Germany. This holds before and after the introduction of the common currency. Hence, asymmetric shocks in the future might take a long time to dissipate.

Based on annual data for growth and inflation forecasts for Germany covering the 1970-2007 period and up to 17 different forecasts per year, we test for a possible asymmetry of the forecasters’ loss function and estimate the degree of asymmetry for each forecasting institution using the approach of Elliot et al. (2005). Furthermore, we test for the rationality of the forecasts under the assumption of a possibly asymmetric loss function and for the features of an optimal forecast under the assumption of a generalised loss function. We find evidence of the existence of an asymmetric loss function of German forecasters only in the case of pooled data and a quad-quad loss function. We can reject the hypothesis of rationality of the growth forecasts based on a pooled dataset, but not on data for single institutions. The rationality of inflation forecasts is frequently rejected in the case of single institutions, and also for pooled data.