Has modelsí forecasting performance for US output growth and inflation changed over time, and when?

Tatevik Sekhposyan and Barbara Rossi

No 09-02, Working Papers from Duke University, Department of Economics

Abstract: We evaluate various modelsí relative performance in forecasting future US output growth and inflation on a monthly basis. Our approach takes into account the possibility that the modelsí relative performance can be varying over time. We show that the modelsí relative performance has, in fact, changed dramatically over time, both for revised and real-time data, and investigate possible factors that might explain such changes. In addition, this paper establishes two empirical stylized facts. Namely, most predictors for output growth lost their predictive ability in the mid-1970s, and became essentially useless in the last two decades. When forecasting inflation, instead, fewer predictors are significant (among which, notably, capacity utilization and unemployment), and their predictive ability significantly worsened around the time of the Great Moderation.

Keywords: Output Forecasts; Inflation Forecasts; Model Selection; Structural Change; Forecast Evaluation; Real-time data. Evaluation (search for similar items in EconPapers)
JEL-codes: C22 C52 C53 (search for similar items in EconPapers)
Pages: 26 Pages
Date: 2008
New Economics Papers: this item is included in nep-bec, nep-cba, nep-ecm and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Has Models' Forecasting Performance for US Output Growth and Inflation Changed over Time, and When? (2010)
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