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Forecasting from Structural Econometric Models

David Hendry () and Grayham Mizon

No 597, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Understanding the workings of whole economies is essential for sound policy advice - but not necessarily for accurate forecasts. Structural models play a major role at most central banks and many other governmental agencies, yet almost none forecast the financial crisis and ensuing recession. We focus on the problem of forecast failure that has become prominent during and after that crisis, and illustrate its sources and many surprising implications using a simple model. An application to 'forecasting' UK GDP over 2008(1)-2011(2) is consistent with our interpretation.

Keywords: Structural models; Location shifts; Economic forecasting; Autometrics (search for similar items in EconPapers)
JEL-codes: C52 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-for
Date: 2012-03-01
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