Title page 1

Contents 1

Introduction 2

Summary of Methodology 3

Results 5

Appendix: Methodology and Data 11

Figures 8

Figure 1. Conditional Bivariate Distribution for Real GDP Growth and Inflation 8

Figure 2. Probabilities of Macroeconomc Scenarios 10

Appendix Tables 13

Table A1. OLS forecasts of macro variables at the four-quarter horizon 13

Table A2. CMD estimation: statistics to be fit 17

Table A3. CMD estimated loadings 17

Table A4. BEGE model selection results 23

Table A5. BEGE parameter estimates 24

Table A6. BEGE parameter-implied statistics 25

Appendix Figures 14

Figure A1. Estimated conditional means from predictive regressions 14

Figure A2. Reduced-form shocks from predictive regressions 14

Figure A3. Estimated supply and demand structural shocks 18

Figure A4. Estimated idiosyncratic inflation and unemployment rate structural shocks 19

Figure A5. Illustrations of BEGE densities 21

Figure A6. Estimated predictive variance for structural shocks 27

Figure A7. Estimated conditional skewness for structural shocks 28

Figure A8. Univariate conditional moments of endogenous shocks 30

Figure A9. Conditional covariance between real GDP and inflation shocks 31

Figure A10. Predictive joint distributions for headline inflation and real GDP growth 33