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Forecast robustness in macroeconometric models

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Author Info

  • Gunnar Bårdsen

    ()
    (Department of Economics, Norwegian University of Science and Technology)

  • Dag Kolsrud

    (Statistics Norway)

  • Ragnar Nymoen

    (University of Oslo)

Abstract

The paper investigates explanations for forecasting invariance to structural breaks. After highlighting the role of policy, we isolate possible structural invariance in a simplified dynamic macro model that nevertheless has features in common with the standard model of aggregate demand and aggregate supply. We find, as expected, that structural breaks in growth rates and in the means of cointegrating relationships will always damage some of the variables. But we also find examples of "insulation" from shocks. The results about partial robustness is a property of the economy itself (here represented by the DGP) and not of the forecasts.

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File URL: http://www.svt.ntnu.no/iso/WP/2012/14_macromodels_GB.pdf
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Bibliographic Info

Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 13712.

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Length: 24 pages
Date of creation: 06 Oct 2012
Date of revision:
Handle: RePEc:nst:samfok:13712

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  1. M Hashem Pesaran & Andreas Pick & Mikhail Pranovich, 2011. "Optimal Forecasts in the Presence of Structural Breaks," DNB Working Papers 327, Netherlands Central Bank, Research Department.
  2. Akram, Q. Farooq & Nymoen , Ragnar, 2007. "Model selection for monetary policy analysis How important is empirical validity?," Memorandum 14/2007, Oslo University, Department of Economics.
  3. Barkbu, Bergljot Bjornson & Nymoen, Ragnar & Roed, Knut, 2003. "Wage coordination and unemployment dynamics in Norway and Sweden," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(1), pages 37-58, March.
  4. Bårdsen, Gunnar & den Reijer, Ard & Jonasson, Patrik & Nymoen, Ragnar, 2012. "MOSES: Model for studying the economy of Sweden," Economic Modelling, Elsevier, vol. 29(6), pages 2566-2582.
  5. Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, number 9780199246502.
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