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Long-run restrictions and survey forecasts of output, consumption and investment

Clements, M. P. (2016) Long-run restrictions and survey forecasts of output, consumption and investment. International Journal of Forecasting, 32 (3). pp. 614-628. ISSN 0169-2070

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To link to this item DOI: 10.1016/j.ijforecast.2015.10.005


We consider the extent to which long-horizon survey forecasts of consumption, investment and output growth are consistent with theory-based steady-state values, and whether imposing these restrictions on long-horizon forecasts will enhance their accuracy. The restrictions we impose are consistent with a two-sector model in which the variables grow at different rates in steady state. The restrictions are imposed by exponential-tilting of simple auxiliary forecast densities. We show that imposing the consumption-output restriction yields modest improvements in the long-horizon output growth forecasts, and larger improvements in the forecasts of the cointegrating combination of consumption and output: the transformation of the data on which accuracy is assessed plays an important role.

Item Type:Article
Divisions:Henley Business School > ICMA Centre
ID Code:45303


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