Forecasting UK GDP growth and inflation under structural change. A comparison of models with time-varying parameters

Alina Barnett, Haroon Mumtaz and Konstantinos Theodoridis

International Journal of Forecasting, 2014, vol. 30, issue 1, 129-143

Abstract: Evidence from a large and growing body of empirical literature strongly suggests that there have been changes in the inflation and output dynamics in the United Kingdom. The majority of these papers base their results on a class of econometric models that allows for time-variation in the coefficients and volatilities of shocks. While these models have been used extensively for studying evolving dynamics and for structural analysis, there has been little evidence that they are useful for forecasting UK output growth and inflation. This paper attempts to fill this gap by comparing the performances of a wide range of time-varying parameter models in forecasting output growth and inflation. We find that allowing for time-varying parameters can lead to large and statistically significant gains in forecast accuracy.

Keywords: Time-varying parameters; Regime switching; Vector autoregressions; Forecast comparison (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0169207013000885
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Forecasting UK GDP growth, inflation and interest rates under structural change: a comparison of models with time-varying parameters (2012)
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:eee:intfor:v:30:y:2014:i:1:p:129-143

DOI: 10.1016/j.ijforecast.2013.06.002

Access Statistics for this article

International Journal of Forecasting is currently edited by R. J. Hyndman

More articles in International Journal of Forecasting from Elsevier
Bibliographic data for series maintained by Catherine Liu ().