Small Sample Properties of Forecasts From Autoregressive Models Under Structural Breaks

Mohammad Pesaran and Allan Timmermann

No 4401, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This Paper develops a theoretical framework for the analysis of small sample properties of forecasts from general autoregressive models under structural breaks. Finite-sample results for the mean-squared forecast error of one-step-ahead forecasts are derived, both conditionally and unconditionally, and numerical results for different types of break specifications are presented. It is established that forecast errors are unconditionally unbiased even in the presence of breaks in the autoregressive coefficients and/or error variances so long as the unconditional mean of the process remains unchanged. Insights from the theoretical analysis are demonstrated in Monte Carlo simulations and on a range of macroeconomic time series from G7 countries. The results are used to draw practical recommendations for the choice of estimation window when forecasting from autoregressive models subject to breaks.

Keywords: Small sample properties of forecasts; Msfe; Structural breaks; Autoregression; Rolling window estimator (search for similar items in EconPapers)
JEL-codes: C22 C53 (search for similar items in EconPapers)
Date: 2004-06
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://cepr.org/publications/DP4401 (application/pdf)

Related works:
Journal Article: Small sample properties of forecasts from autoregressive models under structural breaks (2005)
Working Paper: Small Sample Properties of Forecasts from Autoregressive Models under Structural Breaks (2003)
Working Paper: Small Sample Properties of Forecasts from Autoregressive Models under Structural Breaks (2003)
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:cpr:ceprdp:4401

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP4401

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().