EconPapers    
Economics at your fingertips  
 

What univariate models tell us about multivariate macroeconomic models

James Mitchell, Donald Robertson and Stephen Wright

EMF Research Papers from Economic Modelling and Forecasting Group

Abstract: A longstanding puzzle in macroeconomic forecasting has been that a wide variety of multivariate models have struggled to out-predict univariate representations. We seek an explanation for this puzzle in terms of population properties. We show that if we just know the univariate properties of a time-series, yt, this can tell us a lot about the dimensions and the predictive power of the true (but unobservable) multivariate macroeconomic model that generated yt. We illustrate using data on U.S. inflation. We find that, especially in recent years, the univariate properties of inflation dictate that even the true multivariate model for inflation would struggle to out-predict a univariate model. Furthermore, predictions of changes in inflation from the true model would either need to be IID or have persistence properties quite unlike those of most current macroeconomic models.

Keywords: Forecasting; Macroeconomic Models; Autoregressive Moving Average Representations; Predictive Regressions; Nonfundamental Representations; Inflation Forecasts JEL Classification Numbers: C22; C32; C53; E37 (search for similar items in EconPapers)
Date: 2016
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:

Downloads: (external link)
http://www2.warwick.ac.uk/fac/soc/wbs/subjects/emf/research/papers/EMF_WP.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www2.warwick.ac.uk/fac/soc/wbs/subjects/emf/research/papers/EMF_WP.pdf [301 Moved Permanently]--> https://www2.warwick.ac.uk/fac/soc/wbs/subjects/emf/research/papers/EMF_WP.pdf [301 Moved Permanently]--> https://warwick.ac.uk/fac/soc/wbs/subjects/emf/research/papers/EMF_WP.pdf)

Related works:
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:wrk:wrkemf:08

Access Statistics for this paper

More papers in EMF Research Papers from Economic Modelling and Forecasting Group Contact information at EDIRC.
Bibliographic data for series maintained by Ana Galvão ().

 
Page updated 2024-04-10
Handle: RePEc:wrk:wrkemf:08