Multivariate forecast evaluation and rationality testing

Ivana Komunjer and Michael Owyang

No 2007-047, Working Papers from Federal Reserve Bank of St. Louis

Abstract: In this paper, we propose a new family of multivariate loss functions that can be used to test the rationality of vector forecasts without assuming independence across individual variables. When only one variable is of interest, the loss function reduces to the flexible asymmetric family recently proposed by Elliott, Komunjer, and Timmermann (2005). Following their methodology, we derive a GMM test for multivariate forecast rationality that allows the forecast errors to be dependent, and takes into account forecast estimation uncertainty. We use our test to study the rationality of macroeconomic vector forecasts in the growth rate in nominal output, the CPI inflation rate, and a short-term interest rate.

Keywords: time series analysis; Forecasting (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Multivariate Forecast Evaluation and Rationality Testing (2012)
Working Paper: Multivariate Forecast Evaluation And Rationality Testing (2007)
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DOI: 10.20955/wp.2007.047

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