Is forecasting with large models informative? Assessing the role of judgement in macroeconomic forecasts

Ricardo Mestre and Peter McAdam ()

Journal of Forecasting, 2011, vol. 30, issue 3, 303-324

Abstract: We evaluate residual projection strategies in the context of a large-scale macro model of the euro area and smaller benchmark time‐series models. The exercises attempt to measure the accuracy of model‐based forecasts simulated both out‐of‐sample and in‐sample. Both exercises incorporate alternative residual‐projection methods, to assess the importance of unaccounted‐for breaks in forecast accuracy and off‐model judgement. Conclusions reached are that simple mechanical residual adjustments have a significant impact on forecasting accuracy irrespective of the model in use, likely due to the presence of breaks in trends in the data. The testing procedure and conclusions are applicable to a wide class of models and of general interest. Copyright (C) 2010 John Wiley & Sons, Ltd.

Keywords: macro model; forecast projections; out‐of‐sample; in‐sample; forecast accuracy; structural break; Economic Monetary Union (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (3)

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http://hdl.handle.net/10.1002/for.1173

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Working Paper: Is forecasting with large models informative? Assessing the role of judgement in macroeconomic forecasts (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:jof:jforec:v:30:y:2011:i:3:p:303-324

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