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Has Economic Models’ Forecasting Performance for US Output Growth and Inflation Changed Over Time, and When?

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Author Info
Tatevik Sekhposyan
Barbara Rossi

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Abstract

We evaluate various economic models’ relative performance in forecasting future US output growth and inflation on a monthly basis. Our approach takes into account the possibility that the models’ relative performance can be varying over time. We show that the models’ relative performance has, in fact, changed dramatically over time, both for revised and realtime data, and investigate possible factors that might explain such changes. In addition, this paper establishes two empirical stylized facts. Namely, most predictors for output growth lost their predictive ability in the mid-1970s, and became essentially useless in the last two decades. When forecasting inflation, instead, fewer predictors are significant, and their predictive ability significantly worsened around the time of the Great Moderation.

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Publisher Info
Paper provided by Duke University, Department of Economics in its series Working Papers with number 09-06.

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Length: 39 Pages
Date of creation: 2009
Date of revision:
Handle: RePEc:duk:dukeec:08-6

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Related research
Keywords: Output Growth Forecasts; Inflation Forecasts; Model Selection; Structural Change; Forecast Evaluation; Real-time data. Evaluation;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications

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