Testing for Differences in Path Forecast Accuracy: Forecast-Error Dynamics Matter

Andrew Martinez

No 1717, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: Although the trajectory and path of future outcomes plays an important role in policy decisions, analyses of forecast accuracy typically focus on individual point forecasts. However, it is important to examine the path forecasts errors since they include the forecast dynamics. We use the link between path forecast evaluation methods and the joint predictive density to propose a test for differences in system path forecast accuracy. We also demonstrate how our test relates to and extends existing joint testing approaches. Simulations highlight both the advantages and disadvantages of path forecast accuracy tests in detecting a broad range of differences in forecast errors. We compare the Federal Reserve?s Greenbook point and path forecasts against four DSGE model forecasts. The results show that differences in forecast-error dynamics can play an important role in the assessment of forecast accuracy.

Keywords: GFESM; log determinant; log score; mean square error (search for similar items in EconPapers)
JEL-codes: C12 C22 C52 C53 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2017-11-02
New Economics Papers: this item is included in nep-ecm and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.clevelandfed.org/en/newsroom-and-event ... recast-accuracy.aspx Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:1717

Ordering information: This working paper can be ordered from

DOI: 10.26509/frbc-wp-201717

Access Statistics for this paper

More papers in Working Papers (Old Series) from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().