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Forecasting in Nonstationary Environments: What Works and What Doesn't in Reduced-Form and Structural Models

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  • Raffaella Giacomini
  • Barbara Rossi

Abstract

This review provides an overview of forecasting methods that can help researchers forecast in the presence of non-stationarities caused by instabilities. The emphasis of the review is both theoretical and applied, and provides several examples of interest to economists. We show that modeling instabilities can help, but it depends on how they are modeled. We also show how to robustify a model against instabilities.

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  • Raffaella Giacomini & Barbara Rossi, 2014. "Forecasting in Nonstationary Environments: What Works and What Doesn't in Reduced-Form and Structural Models," Working Papers 819, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:819
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    2. Ambrocio, Gene, 2017. "The real effects of overconfidence and fundamental uncertainty shocks," Research Discussion Papers 37, Bank of Finland.
    3. Alessandro Casini & Pierre Perron, 2018. "Structural Breaks in Time Series," Papers 1805.03807, arXiv.org.

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    More about this item

    Keywords

    forecasting; instabilities; structural breaks;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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