Adaptive Forcasting in the Presence of Recent and Ongoing Structural Change

Liudas Giraitis (), George Kapetanios and Simon Price

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We consider time series forecasting in the presence of ongoing structural change where both the time series dependence and the nature of the structural change are unknown. Methods that downweight older data, such as rolling regressions, forecast averaging over different windows and exponentially weighted moving averages, known to be robust to historical structural change, are found to be also useful in the presence of ongoing structural change in the forecast period. A crucial issue is how to select the degree of downweighting, usually defined by an arbitrary tuning parameter. We make this choice data dependent by minimizing forecast mean square error, and provide a detailed theoretical analysis of our proposal. Monte Carlo results illustrate the methods. We examine their performance on 191 UK and US macro series. Forecasts using data-based tuning of the data discount rate are shown to perform well.

Pages: 48 pages
Date: 2012-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... anios_price_2012.pdf (application/pdf)

Related works:
Working Paper: Adaptive forecasting in the presence of recent and ongoing structural change (2014)
Journal Article: Adaptive forecasting in the presence of recent and ongoing structural change (2013)
Working Paper: Adaptive Forecasting in the Presence of Recent and Ongoing Structural Change (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:een:camaaa:2012-14

Access Statistics for this paper

More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().