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Forecasting with Difference-Stationary and Trend-Stationary Models

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Author Info

  • Clements, M.P.
  • Hendry, D.P.

Abstract

The behavior of difference-stationary and trend-stationary processes has been the subject of considerable analysis in the literature. Nevertheless, there do not seem to be any direct comparisons of properties of each for both being potential data-generation processes. We look at the consequences of incorrect choice between these models for forecasting when parameters are known, and when parameters have to be estimated. The outcomes are surprisingly different from established results.

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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 516.

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Length: 22 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:wrk:warwec:516

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Keywords: TIME SERIES ; STATISTICAL ANALYSIS ; ECONOMETRICS;

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Cited by:
  1. Hamid Baghestani, 2009. "Evaluating random walk forecasts of exchange rates," Studies in Economics and Finance, Emerald Group Publishing, vol. 26(3), pages 171-181, August.
  2. Yan-Leung Cheung & Yin-Wong Cheung & Alan T.K. Wan, 2008. "A High-Low Model of Daily Stock Price Ranges," CESifo Working Paper Series 2387, CESifo Group Munich.
  3. Guillaume Chevillon, 2004. "`Weak` trends for inference and forecasting in finite samples," Economics Series Working Papers 210, University of Oxford, Department of Economics.
  4. Alberto Baffigi & Roberto Golinelli & Giuseppe Parigi, 2002. "Real-time GDP forecasting in the euro area," Temi di discussione (Economic working papers) 456, Bank of Italy, Economic Research and International Relations Area.
  5. Neil R. Ericsson, 2000. "Predictable uncertainty in economic forecasting," International Finance Discussion Papers 695, Board of Governors of the Federal Reserve System (U.S.).
  6. Hendry, David F & Michael P. Clements, 2002. "Economic Forecasting: Some Lessons from Recent Research," Royal Economic Society Annual Conference 2002 99, Royal Economic Society.
  7. Peter C.B. Phillips, 2003. "Laws and Limits of Econometrics," Cowles Foundation Discussion Papers 1397, Cowles Foundation for Research in Economics, Yale University.
  8. David Harvey & Terence Mills, 2002. "Unit roots and double smooth transitions," Journal of Applied Statistics, Taylor & Francis Journals, vol. 29(5), pages 675-683.
  9. David Griffiths, 2004. "The big problem of forecasting small change," Applied Economics, Taylor & Francis Journals, vol. 36(19), pages 2195-2207.
  10. Neil R. Ericsson, 2001. "Forecast uncertainty in economic modeling," International Finance Discussion Papers 697, Board of Governors of the Federal Reserve System (U.S.).

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