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Cointegration and Long-Horizon Forecasting

Francis Diebold () and Peter Christoffersen

No 97/61, IMF Working Papers from International Monetary Fund

Abstract: Imposing cointegration on a forecasting system, if cointegration is present, is believed to improve long-horizon forecasts. Contrary to this belief, at long horizons nothing is lost by ignoring cointegration when the forecasts are evaluated using standard multivariate forecast accuracy measures. In fact, simple univariate Box-Jenkins forecasts are just as accurate. Our results highlight a potentially important deficiency of standard forecast accuracy measures—they fail to value the maintenance of cointegrating relationships among variables—and we suggest alternatives that explicitly do so.

Date: 1997-05-01
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Related works:
Journal Article: Cointegration and Long-Horizon Forecasting (1998)
Working Paper: Cointegration and long-horizon forecasting (1997) Downloads
Working Paper: Cointegration and Long-Horizon Forecasting (1997) Downloads
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