This paper represents the views of the authors and should not be interpreted as reflecting those of the Dutch Ministry of Finance, the Board of Governors of the Federal Reserve System, the Bank of Spain, or other members of their staff. This paper was prepared in part while the second and third authors were visiting INSEE and CEPREMAP, who we thank for generous hospitality. We are grateful to Javier Andrés, Anindya Banerjee, Julia Campos, Christian Gourieroux, David Hendry, Søren Johansen, Augustín Maravall, Alain Monfort, Mark Salmon, Jim Stock, and Hong-Anh Tran for helpful discussions, and to Lisa Barrow and Rafael Domenech for research assistance. All numerical results were obtained using PC-NAIVE and PC-GIVE Version 6.01; cf. Hendry and Neale (1990) and Hendry (1989).