Publications
December 2025, Annals of Applied Statistics
Simple macroeconomic forecast distributions for the G7 economies
Abstract: We present a simple method for predicting the distribution of output growth and inflation in the G7 economies. The method is based on point forecasts published by the International Monetary Fund (IMF) as well as robust statistics from the empirical distribution of the IMF’s past forecast errors while imposing coherence of prediction intervals across horizons. We show that the technique yields calibrated prediction intervals and performs similar to, or better than, more complex time series models in terms of statistical loss functions. We provide a simple website with graphical illustrations of our forecasts as well as time-stamped data files that document their real-time character.
FOR 5583 Researcher:
External Researchers:
Friederike Becker
Fabian Krüger
October 2025, Working Paper
Green or Brown? Investing under Climate Risk & Uncertainty
Abstract: We develop a dynamic portfolio-choice model in which brown assets are penalized in proportion to their carbon emissions, creating an explicit environmental wedge in expected returns. Solving the problem in closed form, we show that higher emissions reduce optimal brown holdings exactly as if investors faced higher asset-specific risk aversion for those positions. A robust-control extension captures ambiguity aversion, which compresses risky allocations and further tilts portfolios toward green assets. Calibrations to equity and clean-energy indices confirm the magnitude of the predicted reallocations and point to meaningful welfare losses from ignoring ambiguity. The framework offers transparent formulas linking climate risk and ambiguity to optimal asset allocation, guiding sustainable portfolios, disclosure, and carbon-pricing policy.
FOR 5583 Researcher:
External Researchers:
Immacolata Oliva
Ilaria Stefani