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A Model Selection Approach To Real-Time Macroeconomic Forecasting Using Linear Models And Artificial Neural Networks

  • Norman R. Swanson
  • Halbert White

We take a model selection approach to the question of whether a class of adaptive prediction models (artificial neural networks) is useful for predicting future values of nine macroeconomic variables. We use a variety of out-of-sample forecast-based model selection criteria, including forecast error measures and forecast direction accuracy. Ex ante or real-time forecasting results based on rolling window prediction methods indicate that multivariate adaptive linear vector autoregression models often outperform a variety of (1) adaptive and nonadaptive univariate models, (2) nonadaptive multivariate models, (3) adaptive nonlinear models, and (4) professionally available survey predictions. Further, model selection based on the in-sample Schwarz information criterion apparently fails to offer a convenient shortcut to true out-of-sample performance measures. © 1997 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/003465397557123
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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 79 (1997)
Issue (Month): 4 (November)
Pages: 540-550

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Handle: RePEc:tpr:restat:v:79:y:1997:i:4:p:540-550
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