Measuring Uncertainty about Long-Run Predictions

Ulrich K. Müller and Mark Watson

The Review of Economic Studies, 2016, vol. 83, issue 4, 1711-1740

Abstract: Long-run forecasts of economic variables play an important role in policy, planning, and portfolio decisions. We consider forecasts of the long-horizon average of a scalar variable, typically the growth rate of an economic variable. The main contribution is the construction of prediction sets with asymptotic coverage over a wide range of data generating processes, allowing for stochastically trending mean growth, slow mean reversion, and other types of long-run dependencies. We illustrate the method by computing prediction sets for 10- to 75-year average growth rates of U.S. real per capita GDP and consumption, productivity, price level, stock prices, and population.

Date: 2016
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Citations: View citations in EconPapers (35)

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Working Paper: Measuring Uncertainty about Long-Run Prediction (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:83:y:2016:i:4:p:1711-1740.

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