EconPapers    
Economics at your fingertips  
 

Advances in Forecasting under Instability

Barbara Rossi

Chapter Chapter 21 in Handbook of Economic Forecasting, 2013, vol. 2, pp 1203-1324 from Elsevier

Abstract: The forecasting literature has identified two important issues: (i) several predictors have substantial and statistically significant predictive content, although only sporadically, and it is unclear whether this predictive content can be exploited reliably; (ii) in-sample predictive content does not necessarily translate into out-of-sample predictive ability, nor ensures the stability of the predictive relationship over time. The objective of this chapter is to understand what we have learned about forecasting in the presence of instabilities. The empirical evidence raises a multitude of questions. If in-sample tests provide poor guidance to out-of-sample forecasting ability, what should researchers do? If there are statistically significant instabilities in Granger-causality relationships, how do researchers establish whether there is any Granger-causality at all? If there is substantial instability in predictive relationships, how do researchers establish which model is the “best†forecasting model? And finally, if a model forecasts poorly, why is that and how should researchers proceed to improve the forecasting models? In this chapter, we answer these questions by discussing various methodologies for inference as well as estimation that have been recently proposed in the literature.

Keywords: Forecasting; Instabilities; Structural breaks; Time-varying parameters; In-sample fit (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (92)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/B978044462731500021X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Advances in Forecasting Under Instability (2011) Downloads
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:ecofch:2-1203

DOI: 10.1016/B978-0-444-62731-5.00021-X

Access Statistics for this chapter

More chapters in Handbook of Economic Forecasting from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2024-10-30
Handle: RePEc:eee:ecofch:2-1203