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Forecasting economic processes

Clements, M. P. ORCID: and Hendry, D. F. (1998) Forecasting economic processes. International Journal of Forecasting, 14 (1). pp. 111-131. ISSN 0169-2070

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To link to this item DOI: 10.1016/S0169-2070(97)00057-5


When the assumption of constant parameters fails, the in-sample fit of a model may be a poor guide to ex-ante forecast performance. We expound a number of models, methods, and procedures that illustrate the impacts of structural breaks on forecast accuracy, and evaluate ways of improving forecast performance. We argue that a theory of economic forecasting which allows for model mis-specification and structural breaks is feasible, and may provide a useful basis for interpreting and circumventing systematic forecast failure in macroeconomics. The empirical time series of consumers' expenditure, and Monte Carlo simulations, illustrate the analysis.

Item Type:Article
Divisions:Henley Business School > ICMA Centre
ID Code:72770

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