For a complete list of publications, please see my Curriculum Vitae.
The New Benchmark for Forecasts of the Real Price of Crude Oil. (with A. Benmoussa and R. Ellwanger), Staff Working Paper, Bank of Canada, 2020-39.
We propose a new no-change benchmark, the last high-frequency observation, to evaluate forecasts of series that are temporally aggregated. The new benchmark improves the mean squared prediction errors of the no-change forecast constructed from average monthly or quarterly data by up to 45 percent. These gains are demonstrated for forecasts of the real price of crude oil. Model-based forecasts display similar gains when estimated with closing prices and become robust across the forecast evaluation sample. Despite the immense forecasts gains, the new benchmark raises the bar for models to claim improvements over the no-change forecast and only futures-based forecasts beyond the one-year horizon significantly outperforms the no-change forecast for the real price of crude oil.
Correlation of Idiosyncratic Asset Return and Wage Risk in the U.S. (Updated March, 2020)
This paper documents the degree of U.S. households’ idiosyncratic asset return risk, its serial correlation, and its correlation with wage risk. Sizeable transitory idiosyncratic return risk is documented for total household assets and for returns within each asset class. Idiosyncratic shocks to wages are found to be correlated with idiosyncratic shocks to returns in specific asset classes. Only younger households are found to experience a positive correlation of idiosyncratic risk to wages and returns to total assets. Return and wage risk serial correlation are found to depend on a household’s age and homeownership.
“Leverage and Rate of Return Heterogeneity among U.S. Households” (Updated March, 2020)
This paper documents permanent heterogeneity in returns on wealth among U.S. households and how this permanent heterogeneity varies over the wealth distribution. This is documented for returns on the entire household wealth and asset portfolios as well as by asset class. The majority of the permanent heterogeneity in the returns on wealth are found to be driven by permanent heterogeneity in the degree and cost of borrowing. Permanent heterogeneity in returns are positively associated with return variability and regressivity of after-tax mortgage rates, which systematically increase with wealth. That said, on average returns to wealth are declining in total household wealth due to lower leverage of wealthy households.
“Commodities and Price Level Targeting” (with D. Coletti, R. Lalonde, P. Masson, and D. Muir), revise and resubmit: Journal of Policy Modeling. (Updated June, 2020)
This paper examines the relative merits of price level versus inflation targeting in response to international shocks to primary commodity markets. Persistent demand driven crude oil price movements result in significant deterioration of the inflation-output gap trade-off available to central banks. When such terms-of-trade shocks are prevalent, price level targeting is inferior to inflation targeting.
This thesis provides empirical evidence on heterogeneity in returns on wealth among U.S. households.
Snudden S., 2019. “Labor and Behavior Determinants of Remittances in Saudi Arabia.” Economic Notes, Special Issue: The Political Economy of Migrant Remittances, vol. 48(3): 1-16. (working paper)
This is the first study to structurally deconstruct remittance dynamics into the behavioral and labor market outcomes of migrants. For Saudi Arabia, the estimates suggest that migrant labor supply is highly elastic. The important determinates of remittance dynamics are the marginal propensity to remit, migrant wages, and the extensive margin of migrant labor supply. The marginal propensity to remit is found to respond counter‐cyclically to foreign gross domestic product.
Snudden S., 2018. “International Remittances, Migration, and Primary Commodities.” The World Economy, vol. 41(11): 2934–2953. (working paper, appendix)
This paper documents the global crude oil market as a driver of international migration and remittances. Large oil exporters who are labor importers transmit international financial and labor spillovers to oil-importing labor exporters. Despite large financial flows, the remittees’ economic conditions are dominated by the trade and crude oil channels.
Snudden S., 2018. “Targeted Growth Rates for Long-Horizon Crude Oil Price Forecasts.” International Journal of Forecasting, vol. 34: 1–16.
This paper uses insights from spectral analysis to develop a technique to improve medium- to long-horizon forecast accuracy. The technique is applied to forecast methods of the price of crude oil and found to be able to generate similar precision at 1-5 year horizons that had previously only been found at horizons of less than one year.
Snudden S., 2016. “Cyclical Fiscal Rules for Oil-Exporting Countries.” Economic Modelling, vol. 59: 473–483.
This paper examines optimal fiscal and monetary policy responses to temporary shocks to the international market for crude oil. Budget-balance tax-gap rules and inflation targeting are the preferred regimes in order to stabilize the macroeconomic volatility and welfare in oil-exporting countries. The output-inflation trade-off is of particular concern for oil exporters relative to non-oil commodity exporters due to the pass through of oil prices into headline inflation.
Andersen, D., B. Hunt, and S. Snudden. 2014. “Fiscal Consolidation in the Euro Area: How Much Pain can Structural Reforms Ease?” Journal of Policy Modeling, vol. 36(5): 785–799.
This paper examines the scope for structural reforms in the euro area to offset the negative effects of fiscal consolidation. The results suggest that structural reforms in core countries could be expected to offset the near-term negative impact on activity arising from the required fiscal consolidation. However, for the periphery, the results suggest that it would take several years before structural reforms could return the level of output back to its pre-consolidation path.
Beaton, K., R. Lalonde, and S. Snudden. 2014. “The Propagation of U.S. Shocks to Canada: Understanding the Role of Real-Financial Linkages.” Canadian Journal of Economics, vol. 47(2): 466-497.
This paper introduces a financial accelerator, inter-bank lending markets, and international bank lending into an international DSGE model. We find that the U.S. banking and interbank markets are an important source of variability. The presence of both the demand and the real supply sides of credit in the model help to capture the stylized facts of both domestic and international business cycles.
Coenen, G., C. de Resende, C. Erceg, C. Freedman, D. Furceri, J. in’t Veld, M. Kumhof, R. Lalonde, D. Laxton, J. Linde, A. Mourougane, D. Muir, S. Mursula, J. Roberts, W. Roeger, S. Snudden, and M. Trabant, 2012. “Effects of Fiscal Stimulus in Structural Models.” American Economic Journal: Macroeconomics, vol. 4(1): 22–68.
The paper compares discretionary fiscal stimulus using seven policy and two prominent academic DSGE models. Considerable agreement across models is found on both the absolute and relative sizes of different types of fiscal multipliers. Fiscal policy is most effective if it has moderate persistence and if monetary policy is accommodative. Permanently higher spending or deficits imply significantly lower initial multipliers.
Klyuev, V. and S. Snudden, 2011. “Effects of Fiscal Consolidation in the Czech Republic.” The Czech Journal of Economics and Finance, vol. 61(4): 306-326.
This paper assesses dynamic fiscal multipliers for a variety of fiscal instruments, consolidation durations, assumptions about credibility, and monetary policy responses in the Czech Republic. The article evaluates proposed and alternative “growth-friendly” fiscal consolidations to achieve the government’s balanced budget target.
Duttagupta, R., J, Bluedorn, A. Pescatori, and S. Snudden . “Commodity Price Cycles and Commodity Exporters,” Chapter 4 in the World Economic Outlook, April 2012. International Monetary Fund: Washington D.C.
Anderson, D., M. Badia, E. Ruiz, S. Snudden and F. Vitek, 2015. “Fiscal Consolidation under the SGP: Some Illustrative Simulations,” Chapter 7 in Mechanics of a Strong Euro Area, by M. Pradhan, and P. K. Brooks (eds), International Monetary Fund: Washington D.C.
de Resende, C., R. Lalonde, and S. Snudden, “The Power of Many: Assessing the Economic Impact of the Global Fiscal Stimulus,” Bank of Canada Discussion Paper 2010-1.
de Resende, C., K. Beaton, R. Lalonde, and S. Snudden, 2010. “Prospects for Global Current Account Rebalancing,” Bank of Canada Discussion Paper 2010-4.
Andersen, D., B. Hunt, M. Kortelainen, M. Kumhof, D. Laxton, D. Muir, S. Mursula, and S. Snudden, 2013. “Getting to Know GIMF: The Simulation Properties of the Global Integrated Monetary and Fiscal Model,” IMF Working Paper No. 2013-55.
Andrle, M., P. Blagrave, P. Espaillat, K. Honjo, B. Hunt, M. Kortelainen, R. Lalonde, D. Laxton, E. Mavroeidi, D. Muir, S. Mursula, and S. Snudden, 2015. “The Flexible System of Global Models – FSGM,” IMF Working Paper No. 2015-64.
“A Better Way to Forecast Crude Oil Prices,” Economics and Policy Blog, The John Deutsch Institute for the Study of Economic Policy, Queen’s University, October 24, 2016.
“Oil Exporters Should NOT Price Level Target,” Economics and Policy Blog, The John Deutsch Institute for the Study of Economic Policy, Queen’s University, March 31, 2017.
“How we decided on 2% fiscal stimulus during the Great Recession,” Economics and Policy Blog, The John Deutsch Institute for the Study of Economic Policy, Queen’s University, June 21, 2017.
Interviews (Not Authored)
“Laurier economists on whether a recession is coming” Sept. 12, 2019, Wilfrid Laurier University.