Measuring Predictability: Theory and Macroeconomic Applications

Francis Diebold and Lutz Kilian

No 213, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: We propose a measure of predictability based on the ratio of the expected loss of a short-run forecast to the expected loss of a long-run forecast. This predictability measure can be tailored to the forecast horizons of interest, and it allows for general loss functions, univariate or multivariate information sets, and stationary or nonstationary data. We propose a simple estimator, and we suggest resampling methods for inference. We then provide several macroeconomic applications. First, based on fitted parametric models, we assess the predictability of a variety of macroeconomic series. Second, we analyze the internal propagation mechanism of a standard dynamic macroeconomic model by comparing predictability of model inputs and model outputs. Third, we use predictability as a metric for assessing the similarity of data simulated from the model and actual data. Finally, we sketch several promising directions for future research.

Date: 1997-08
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published as Diebold, Franics S. and Lutz Kilian. "Measuring Predictability: Theory And Macroeconomic Applications," Jouranl of Applied Econometrics, 2001, v16(6), 657-669.

Downloads: (external link)
http://www.nber.org/papers/t0213.pdf (application/pdf)

Related works:
Journal Article: Measuring predictability: theory and macroeconomic applications (2001)
Working Paper: Measuring Predictability: Theory And Macroeconomic Applications (2000)
Working Paper: Measuring Predictability: Theory and Macroeconomic Applications (1998)
Working Paper: Measuring predictability: theory and macroeconomic applications (1997)
Working Paper: Measuring Predictability: Theory and Macroeconomic Applications
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:nbr:nberte:0213

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/t0213

Access Statistics for this paper

More papers in NBER Technical Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().