A panel data approach to economic forecasting: The bias-corrected average forecast

João Victor Issler and Luiz Renato Lima ()

Journal of Econometrics, 2009, vol. 152, issue 2, pages 153-164

Abstract: In this paper, we propose a novel approach to econometric forecasting of stationary and ergodic time series within a panel-data framework. Our key element is to employ the (feasible) bias-corrected average forecast. Using panel-data sequential asymptotics we show that it is potentially superior to other techniques in several contexts. In particular, it is asymptotically equivalent to the conditional expectation, i.e., has an optimal limiting mean-squared error. We also develop a zero-mean test for the average bias and discuss the forecast-combination puzzle in small and large samples. Monte-Carlo simulations are conducted to evaluate the performance of the feasible bias-corrected average forecast in finite samples. An empirical exercise, based upon data from a well known survey is also presented. Overall, these results show promise for the feasible bias-corrected average forecast.

Keywords: Forecast; combination; Forecast-combination; puzzle; Common; features; Panel-data; Bias-corrected; average; forecast (search for similar items in EconPapers)
Date: 2009

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Related works:
Working Paper: A Panel Data Approach to Economic Forecasting: The Bias-Corrected Average Forecast (2007)
Working Paper: A Panel Data Approach to Economic Forecasting: The Bias-Corrected Average Forecast (2008)
Working Paper: A Panel Data Approach to Economic Forecasting: The Bias-Corrected Average Forecast (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:eee:econom:v:152:y:2009:i:2:p:153-164

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