Do Economic Restrictions Improve Forecasts?
A previous study showed that imposing economic restrictions improves the forecasting ability of food demand systems, thus warranting their use even when rejected in-sample. This study attempts to determine whether this is due solely to the fact that restrictions improve degrees of freedom. Results indicate that restrictions improve forecasting ability even when not derived from economic theory, but theoretical restrictions forecast best.
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- Ashley, R & Granger, C W J & Schmalensee, R, 1980. "Advertising and Aggregate Consumption: An Analysis of Causality," Econometrica, Econometric Society, vol. 48(5), pages 1149-67, July.
- Terry L. Kastens & Gary W. Brester, 1996. "Model Selection and Forecasting Ability of Theory-Constrained Food Demand Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 301-312.
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