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Forecasting from Structural Econometric Models

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Author Info

  • David Hendry
  • Grayham E. Mizon

Abstract

Understanding the workings of whole economies is essential for sound policy advice - but not necessarily for accurate forecasts.� Structural models play a major role at most central banks and many other governmental agencies, yet almost none forecast the financial crisis and ensuing recession.� We focus on the problem of forecast failure that has become prominent during and after that crisis, and illustrate its sources and many surprising implications using a simple model.� An application to 'forecasting' UK GDP over 2008(1)-2011(2) is consistent with our interpretation.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 597.

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Date of creation: 01 Mar 2012
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Handle: RePEc:oxf:wpaper:597

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Related research

Keywords: Structural models; Location shifts; Economic forecasting; Autometrics;

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References

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  1. Jennifer L. Castle & Jurgen A. Doornik & David F. Hendry, 2011. "Evaluating Automatic Model Selection," Journal of Time Series Econometrics, De Gruyter, vol. 3(1), pages 8.
  2. Engle, Robert F. & Hendry, David F., 1993. "Testing superexogeneity and invariance in regression models," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 119-139, March.
  3. Hendry, David F. & Neale, Adrian J. & Srba, Frank, 1988. "Econometric analysis of small linear systems using PC-FIML," Journal of Econometrics, Elsevier, vol. 38(1-2), pages 203-226.
  4. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
  5. Castle, Jennifer L. & Fawcett, Nicholas W.P. & Hendry, David F., 2010. "Forecasting with equilibrium-correction models during structural breaks," Journal of Econometrics, Elsevier, vol. 158(1), pages 25-36, September.
  6. David Hendry & Hans-Martin Krolzig, 2003. "The Properties of Automatic Gets Modelling," Economics Papers 2003-W14, Economics Group, Nuffield College, University of Oxford.
  7. repec:oxf:wpaper:470 is not listed on IDEAS
  8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  9. James H. Stock & Mark W. Watson, 1994. "Evidence on Structural Instability in Macroeconomic Time Series Relations," NBER Technical Working Papers 0164, National Bureau of Economic Research, Inc.
  10. Zellner, Arnold & Palm, Franz, 1974. "Time series analysis and simultaneous equation econometric models," Open Access publications from Maastricht University urn:nbn:nl:ui:27-5746, Maastricht University.
  11. David Hendry & Carlos Santos, 2010. "An Automatic Test of Super Exogeneity," Economics Series Working Papers 476, University of Oxford, Department of Economics.
  12. Tobias, Justin & Zellner, Arnold, 2000. "A Note on Aggregation, Disaggregation and Forecasting Performance," Staff General Research Papers 12024, Iowa State University, Department of Economics.
  13. Zellner, Arnold, 1986. "Biased predictors, rationality and the evaluation of forecasts," Economics Letters, Elsevier, vol. 21(1), pages 45-48.
  14. David F. Hendry & Grayham E. Mizon, 2011. "Econometric Modelling of Time Series with Outlying Observations," Journal of Time Series Econometrics, De Gruyter, vol. 3(1), pages 6.
  15. David Hendry & Søren Johansen & Carlos Santos, 2008. "Automatic selection of indicators in a fully saturated regression," Computational Statistics, Springer, vol. 23(2), pages 337-339, April.
  16. Hendry, David F., 2006. "Robustifying forecasts from equilibrium-correction systems," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 399-426.
  17. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164.
  18. Hendry, David F., 1976. "The structure of simultaneous equations estimators," Journal of Econometrics, Elsevier, vol. 4(1), pages 51-88, February.
  19. Søren Johansen & Bent Nielsen, 2008. "An analysis of the indicator saturation estimator as a robust regression," Discussion Papers 08-03, University of Copenhagen. Department of Economics.
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Cited by:
  1. Wolfgang Nierhaus, 2012. "Konjunkturprognosen heute – Möglichkeiten und Probleme," ifo Dresden berichtet, Ifo Institute for Economic Research at the University of Munich, vol. 19(05), pages 29-37, October.

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