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Assessing the Forecasting Performance of a Macroeconomic Model

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Author Info

  • Hukkinen, Juhana

    () (Bank of Finland)

  • Viren, Matti

    () (Bank of Finland Research)

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    Abstract

    This paper contains a description of a small quarterly forecasting model for the Finnish economy. We evaluate the forecasting properties of the model by means of stochastic simulation involving both the endogenous and exogenous variables of the model. The simulations allow us to identify and quantify the main sources of forecasting uncertainty. We are also able to assess the linearity of the model. Forecasting performance is also analyzed in a conventional way by means of dynamic simulation. The important issue in these simulations is the stability of the model: how simulated values depend on the estimation period and the ordering of time periods.

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    File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/DP_23_1996.pdf
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    Bibliographic Info

    Paper provided by Bank of Finland in its series Research Discussion Papers with number 23/1996.

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    Length: 26 pages
    Date of creation: 27 Sep 1996
    Date of revision:
    Handle: RePEc:hhs:bofrdp:1996_023

    Contact details of provider:
    Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
    Web page: http://www.suomenpankki.fi/en/
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    Related research

    Keywords: forecasting; macro models; simulation;

    References

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    1. Ray C. Fair & John B. Taylor, 1980. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Cowles Foundation Discussion Papers 564, Cowles Foundation for Research in Economics, Yale University.
    2. Brown, Bryan W & Mariano, Roberto S, 1984. "Residual-Based Procedures for Prediction and Estimation in a Nonlinear Simultaneous System," Econometrica, Econometric Society, vol. 52(2), pages 321-43, March.
    3. Ray C. Fair, 1989. "Does Monetary Policy Matter? Narrative Versus Structural Approaches," NBER Working Papers 3045, National Bureau of Economic Research, Inc.
    4. Pagan, Adrian, 1989. "On the role of simulation in the statistical evaluation of econometric models," Journal of Econometrics, Elsevier, vol. 40(1), pages 125-139, January.
    5. Brunner, Allan D. & Kamin, Steven B., 1996. "Determinants of the 1991-1993 Japanese recession: Evidence from a structural model of the Japanese economy," Japan and the World Economy, Elsevier, vol. 8(4), pages 363-399, December.
    6. Fisher, Paul G. & Wallis, Kenneth F., 1990. "The historical tracking performance of UK macroeconometric models 1978-1985," Economic Modelling, Elsevier, vol. 7(2), pages 179-197, April.
    7. Hatanaka, Michio, 1978. "On the efficient estimation methods for the macro-economic models nonlinear in variables," Journal of Econometrics, Elsevier, vol. 8(3), pages 323-356, December.
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