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Vector autoregressions as a tool for forecast evaluations

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  • Roy H. Webb

Abstract

In his article, “Vector Autoregressions as a Tool for Forecast Evaluation,” Roy H. Webb proposes that VAR forecasts be used as a standard of comparison for other forecasts. He begins by explaining how conventional forecasting models are constructed and used, and summarizes a few common objections to these models. He then describes the VAR methodology and compares forecasts from a simple VAR model with those from a consulting firm that uses a conventional model and with a series of consensus forecasts. The VAR model holds its own in this competition; in fact, only the VAR model is able to predict the 1981-1982 recession one year before its occurrence.

Suggested Citation

  • Roy H. Webb, 1984. "Vector autoregressions as a tool for forecast evaluations," Economic Review, Federal Reserve Bank of Richmond, issue Jan, pages 3-11.
  • Handle: RePEc:fip:fedrer:y:1984:i:jan:p:3-11:n:v.70no.1
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    File URL: https://fraser.stlouisfed.org/files/docs/publications/frbrichreview/rev_frbrich198401.pdf
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    References listed on IDEAS

    as
    1. Robert B. Litterman, 1979. "Techniques of forecasting using vector autoregressions," Working Papers 115, Federal Reserve Bank of Minneapolis.
    2. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
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    Cited by:

    1. Arnold Cote, K. Nicole & Smith, Wm. Doyle & Fullerton, Thomas M., Jr., 2010. "Municipal Non-Residential Real Property Valuation Forecast Accuracy," MPRA Paper 32116, University Library of Munich, Germany, revised 11 Feb 2011.
    2. Thomas M. Fullerton Jr. & Ana Cecilia Nava, 2004. "Short-Term Water Dynamics in Chihuahua City, Mexico," Urban/Regional 0404001, EconWPA.
    3. Darrat, Ali F. & Mukherjee, Tarun K., 1995. "Inter-industry differences and the impact of operating and financial leverages on equity risk," Review of Financial Economics, Elsevier, vol. 4(2), pages 141-155.
    4. Roberto Tinajero & Thomas M. Fullerton & Lawrence Waldman, 2005. "Regional econometric income forecast accuracy," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 24(5), pages 325-333.
    5. William M. Lupoletti & Roy H. Webb, 1984. "Defining and improving the accuracy of macroeconomic forecasts : contributions from a VAR model," Working Paper 84-06, Federal Reserve Bank of Richmond.
    6. Fullerton, Thomas Jr. & Laaksonen, Mika M. & West, Carol T., 2001. "Regional multi-family housing start forecast accuracy," International Journal of Forecasting, Elsevier, vol. 17(2), pages 171-180.

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    Keywords

    Forecasting;

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