Preliminary data and econometric forecasting: an application with the Bank of Italy Quarterly Model
This paper discusses the use of preliminary data in econometric forecasting. The standard practice is to ignore the distinction between preliminary and final data, the forecasts that do so here being termed na�ve forecasts. It is shown that in dynamic models a multistep-ahead na�ve forecast can achieve a lower mean square error than a single-step-ahead one, as it is less affected by the measurement noise embedded in the preliminary observations. The minimum mean square error forecasts are obtained by optimally combining the information provided by the model and the new information contained in the preliminary data, which can be done within the state space framework as suggested in numerous papers. Here two simple, in general suboptimal, methods of combining the two sources of information are considered: modifying the forecast initial conditions by means of standard regressions and using intercept corrections. The issues are explored using Italian national accounts data and the Bank of Italy Quarterly Econometric Model. Copyright © 2006 John Wiley & Sons, Ltd.
Volume (Year): 25 (2006)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966|
When requesting a correction, please mention this item's handle: RePEc:jof:jforec:v:25:y:2006:i:1:p:1-23. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.