The forecasting performance of various models for seasonality and nonlinearity for quarterly industrial production

Philip Hans Franses and Dick van Dijk

No EI 2001-14, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: Seasonality often accounts for the major part of quarterly or monthly movements in detrended macro-economic time series. In addition, business cycle nonlinearity is a prominent feature of many such series too. A forecaster can nowadays consider a wide variety of time series models which describe seasonal variation and regime-switching behaviour. In this paper we examine the forecasting performance of various models for seasonality and nonlinearity using quarterly industrial production series for 17 OECD countries. We find that forecasting performance varies widely across series, across forecast horizons and across seasons. However, in general, linear models with fairly simple descriptions of seasonality outperform at short forecast horizons, whereas nonlinear models with more elaborate seasonal components dominate at longer horizons.

Keywords: forecasting; industrial production; nonlinearity; seasonality (search for similar items in EconPapers)
Date: 2001-04-26
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Citations: View citations in EconPapers (4)

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Journal Article: The forecasting performance of various models for seasonality and nonlinearity for quarterly industrial production (2005)
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