HOW FAR CAN WE FORECAST? FORECAST CONTENT HORIZONS FOR SOME IMPORTANT MACROECONOMIC TIME SERIES

John Galbraith and Greg Tkacz ()

Departmental Working Papers from McGill University, Department of Economics

Abstract: For stationary transformations of variables, there exists a maximum horizon beyond which forecasts can provide no more information about the variable than is present in the unconditional mean. Meteorological forecasts, typically excepting only experimental or exploratory situations, are not reported beyond this horizon; by contrast, little generally-accepted information about such maximum horizons is available for economic variables. In this paper we estimate such content horizons for a variety of economic variables, and compare these with the maximum horizons which we observe reported in a large sample of empirical economic forecasting studies. We find that there are many instances of published studies which provide forecasts exceeding, often by substantial margins, our estimates of the content horizon for the particular variable and frequency. We suggest some simple reporting practices for forecasts that could potentially bring greater transparency to the process of making the interpreting economic forecasts.

JEL-codes: C53 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006-09
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:mcl:mclwop:2006-13

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