For a complete list of publications, please see my Curriculum Vitae.
Publication Indicators
Google Scholar: h=10 (All time)
IDEAS: Top 5% of authors worldwide in one citation category; ranked within Top Economists by Cohorts among 2019 PhD recipients worldwide.
Social Media
“Hitting the (Bench)mark when Forecasting the Price of Oil” Ergs and Equilibrium Podcast – Energy, environment, economics, January 26, 2023. Ivey Business School, University of Western Ontario.
Working Papers
Forecasts of the Real Price of Oil Revisited: Do they Beat the Random Walk? (with R. Ellwanger)
– Bank of Canada, Sept. 2020, Staff Working Paper, 2020-39 *(see note below)
– Short presentation on YouTube (NEW!)
– Real-time data, updated monthly
– Updated May 2023, minor R&R Journal of Banking and Finance
The no-change forecast commonly used to benchmark forecasting models of the real price of crude oil is based on the monthly average price. We demonstrate that an alternative no-change forecast, the end-of-month price, reflects the random-walk forecast from daily oil prices and is significantly more accurate in predicting the real price of oil up to one year ahead. We show that all existing forecasts that outperform the monthly average no-change forecast at the one-step-ahead prediction perform worse than the end-of-month no-change forecast. The result calls into question the usefulness of existing forecasting approaches for the real price of crude oil relative to naive forecasts.
Don’t Ruin the Surprise: Temporal Aggregation Bias in Structural Innovations
– NEW PAPER! May 2023: to be presented at the CEAs and IAAE in summer 2023
Innovations from structural economic models may not fully represent new information when the data used in estimation is temporally aggregated. Sufficient conditions and a statistical test for temporal aggregation bias are provided. Over one third of structural innovations are explained by lagged information when autoregressive models are estimated with monthly average data. Applications of the test document predictability of the structural shocks to the global market for crude oil (Kilian, 2009; Baumeister and Hamilton, 2019). In addition, we find evidence that agents have already responded to the predictable component of innovations. The findings question the surprise component in estimates of innovations from economic models that rely on temporally aggregated data.
Leverage and Rate of Return Heterogeneity among U.S. Households
-First version as job market paper, August 2018
-Third chapter of doctoral thesis, October 2019.
–20-min. 2022 CEA and 2023 ASSA presentation on YouTube
-Updated December 2022, submitted
This paper proposes measures of panel-data for returns to U.S. households’ wealth and documents new facts on the heterogeneity in returns to wealth between households and over the wealth distribution. First, leverage exhibits permanent heterogeneity and explains most of the permanent heterogeneity in the returns to wealth. As such, the permanent heterogeneity in returns to assets understates the permanent heterogeneity in returns to wealth, with a standard deviation of 3.8 and 9.2 percentage points, respectively. Second, returns to wealth decline as households become wealthier and exhibit declining returns to scale and specialization. Third, household-specific returns to wealth and assets are correlated with the persistent component of labor earnings. Fourth, housing and the regressivity of after-tax mortgage rates are critical to explaining the permanent heterogeneity in returns. These findings inform the direction of scale dependence and degree of type dependence in returns heterogeneity for the study of portfolio allocation, wealth inequality, social mobility, and corresponding policies.
Idiosyncratic Asset Return and Wage Risk of US Households
–Fourth chapter of doctoral thesis, October 2019.
-10-min. 2022 ASSA presentation on YouTube
–Updated May 2023, submitted.
This paper documents the degree of idiosyncratic asset return risk, serial correlation, and correlation with wage risk for US households. Novel panel-data measures for returns on household assets are proposed. Sizeable idiosyncratic return risk is documented to exist concurrently with permanent heterogeneity in household-specific returns and exhibits negative serial correlation. On average, idiosyncratic permanent risk to wages and transitory risk to total asset returns are correlated. This arises primarily from correlated wage and return risk to primary housing assets, and is age-dependent. The estimates inform the covariance structure of idiosyncratic asset returns and wage risk.
Carpe Diem: Can daily oil prices improve model-based forecasts of the real price of crude oil? (with A. Benmoussa and R. Ellwanger)
– Bank of Canada, Sept. 2020, Staff Working Paper, 2020-39 *(see note below)
– Real-time data, updated monthly
– Updated August 2022, submitted.
The standard approach in the literature is to compute model-based forecasts of the real price of crude oil with monthly average prices. We examine how the underlying daily oil prices can be used to improve such forecasts. We find that using unaveraged oil prices, especially end-of-month prices, yields large gains across a variety of forecast approaches and in some cases almost doubles forecast accuracy. Contrary to models estimated with monthly average prices, models that utilize the underlying daily prices can outperform the random walk forecast at short horizons.
Seize the Last Day: Period-End-Price Sampling for Forecasts of Temporally Aggregated Data (with R. Ellwanger)
– LCERPA Working Paper No. 2021-5, September 2021.
– Updated Feb. 2023, resubmission requested, International Journal of Forecasting.
Economists often need to forecast temporally aggregated data, such as monthly or quarterly averages. However, when the underlying data is persistent, forecasts of the aggregate constructed using the aggregated data are inefficient. A straightforward solution is proposed, Period-End-Price Sampling (PEPS), which uses point-in-time forecasts constructed with end-of-period data as forecasts of aggregated data. We show that PEPS results in large forecast improvements relative to forecasts constructed with averaged data. In both theory and practice, the gains are comparable to efficient recursive and direct forecasts. PEPS has advantages over alternative disaggregated forecast approaches, including allowing for forecast models to be constructed at the lower frequency of the forecast target.
*The theoretical and methods contributions of the unpublished Bank of Canada working paper under the title “The New Benchmark for Forecasts of the Real Price of Crude Oil” (5 min. presentation on YouTube) has been subsumed and expanded upon in four separate papers: “Forecasts of the real price of oil revisited” compares existing forecasts to the random walk for the first time; “Carpe Diem” applies disaggregated approaches to model-based forecasts; “Period-End-Price Sampling” introduces the method of Period-End-Price Sampling (PEPS); and “Futures Prices are Useful Predictors of the Spot Price of Crude Oil,” forthcoming in The Energy Journal.
Doctoral dissertation
Snudden, S. (2019). Household Return Heterogeneity in the United States.
– Recipient of the 2019-2020 C.A. Curtis Prize in Economics for best PhD thesis.
This thesis provides empirical evidence on heterogeneity in returns on wealth among U.S. households.
Refereed Publications
Ellwanger, R. and S. Snudden, 2023. “Futures Prices are Useful Predictors of the Spot Price of Crude Oil” The Energy Journal, vol. 44(4): 45-62.
– Short presentation on Youtube (NEW!)
Contrary to the established view, futures prices significantly improve upon the accuracy of monthly no-change forecasts. This results from two innovations. First, we document that independent of the construction of futures-based forecasts, longer-horizon futures prices have become better predictors of crude oil spot prices since the mid-2000s. Second, we show that futures curves constructed using end-of-month prices instead of average prices have consistently been able to generate large accuracy-improvements for short-horizon forecasts of average prices. These findings are remarkably robust and apply to all major crude oil benchmarks.
Coletti, D., R. Lalonde, P. Masson, D. Muir and S. Snudden, 2021. “Commodities and Monetary Policy: Implications for Inflation and Price Level Targeting” Journal of Policy Modelling, vol. 43(5): 982-999.
This paper examines the relative merits of price level versus inflation targeting in response to international shocks to primary commodity markets. Persistent 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.
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 remittance flows induced by global crude oil shocks, the remittees’ economic conditions are dominated by the terms of 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.
This 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 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.
Chapters
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.
Other Papers
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.
Blog Posts
“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
“Laurier economists on whether a recession is coming” Sept. 12, 2019, Wilfrid Laurier University.
Stephen Snudden 