Forecast Content And Content Horizons For Some Important Macroeconomic Time Series
AbstractFor quantities that are approximately stationary, the information content of statistical forecasts tends to decline as the forecast horizon increases, and there exists a maximum horizon beyond which forecasts cannot provide discernibly more information about the variable than is present in the unconditional mean (the content horizon). The pattern of decay of forecast content (or skill) with increasing horizon is well known for many types of meteorological forecasts; by contrast, little generally-accepted information about these patterns or content horizons is available for economic variables. In this paper we attempt to develop more information of this type by estimating content horizons for variety of macroeconomic quantities; more generally, we characterize the pattern of decay of forecast content as we project farther into the future. We find wide variety of results for the different macroeconomic quantities, with models for some quantities providing useful content several years into the future, for other quantities providing negligible content beyond one or two months or quarters.
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Bibliographic InfoPaper provided by McGill University, Department of Economics in its series Departmental Working Papers with number 2007-01.
Length: 20 pages
Date of creation: 2007
Date of revision:
Other versions of this item:
- John W. Galbraith & Greg Tkacz, 2007. "Forecast content and content horizons for some important macroeconomic time series," Canadian Journal of Economics, Canadian Economics Association, vol. 40(3), pages 935-953, August.
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-21 (All new papers)
- NEP-ETS-2007-04-21 (Econometric Time Series)
- NEP-FOR-2007-04-21 (Forecasting)
- NEP-MAC-2007-04-21 (Macroeconomics)
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