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Forecasting breaks and forecasting during breaks

Jennifer Castle (), David Hendry () and Nicholas Fawcett

No 535, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Success in accurately forecasting breaks requires that they are predictable from relevant information available at the forecast origin using an appropriate model form, which can be selected and estimated before the break. To clarify the roles of these six necessary conditions, we distinguish between the information set for 'normal forces' and the ones for 'break drivers', then outline sources of potential information. Relevant non-linear, dynamic models facing multiple breaks can have more candidate variables than observations, so we discuss automatic model selection. As a failure to accurately forecast breaks remains likely, we augment our strategy by modelling breaks during their progress, and consider robust forecasting devices.

Keywords: Economic forecasting; Structural breaks; Information sets; Non-linearity (search for similar items in EconPapers)
JEL-codes: C1 C53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-ets and nep-for
Date: 2011-02-01
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