How Far Can We Forecast? Forecast Content Horizons For Some Important Macroeconomic Time Series
For stationary transformations of variables, there exists a maximum horizon beyond which forecasts can provide no more information about the variable than is present in the unconditional mean. Meteorological forecasts, typically excepting only experimental or exploratory situations, are not reported beyond this horizon; by contrast, little generally-accepted information about such maximum horizons is available for economic variables. In this paper we estimate such content horizons for a variety of economic variables, and compare these with the maximum horizons which we observe reported in a large sample of empirical economic forecasting studies. We find that there are many instances of published studies which provide forecasts exceeding, often by substantial margins, our estimates of the content horizon for the particular variable and frequency. We suggest some simple reporting practices for forecasts that could potentially bring greater transparency to the process of making the interpreting economic forecasts.
|Date of creation:||Sep 2006|
|Date of revision:|
|Contact details of provider:|| Postal: 855 Sherbrooke St. W., Montréal, Québec, H3A 2T7|
Phone: (514) 398-3030
Fax: (514) 398-4938
Web page: http://www.repec.mcgill.ca
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James H. Stock & Mark W. Watson, 1998. "A Comparison of Linear and Nonlinear Univariate Models for Forecasting Macroeconomic Time Series," NBER Working Papers 6607, National Bureau of Economic Research, Inc.
- Galbraith, John W. & KI[#x1e63]Inbay, Turgut, 2005. "Content horizons for conditional variance forecasts," International Journal of Forecasting, Elsevier, vol. 21(2), pages 249-260.
- Marc Brisson & Bryan Campbell & John Galbraith, 2001. "Forecasting Some Low-Predictability Time Series Using Diffusion Indices," CIRANO Working Papers 2001s-46, CIRANO.
- Francis X. Diebold & Lutz Kilian, 1997.
"Measuring Predictability: Theory and Macroeconomic Applications,"
NBER Technical Working Papers
0213, National Bureau of Economic Research, Inc.
- Francis X. Diebold & Lutz Kilian, 2001. "Measuring predictability: theory and macroeconomic applications," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(6), pages 657-669.
- Francis X. Diebold & Lutz Kilian, 1998. "Measuring Predictability: Theory and Macroeconomic Applications," Working Papers 98-16, New York University, Leonard N. Stern School of Business, Department of Economics.
- Diebold, Francis X & Kilian, Lutz, 2000. "Measuring Predictability: Theory And Macroeconomic Applications," CEPR Discussion Papers 2424, C.E.P.R. Discussion Papers.
- Francis X. Diebold & Lutz Kilian, 1997. "Measuring predictability: theory and macroeconomic applications," Working Papers 97-23, Federal Reserve Bank of Philadelphia.
- Granger, Clive W J, 1996. "Can We Improve the Perceived Quality of Economic Forecasts?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(5), pages 455-73, Sept.-Oct.
- Li Fuchun & Tkacz Greg, 2004. "Combining Forecasts with Nonparametric Kernel Regressions," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 8(4), pages 1-18, December.
- Granger, Clive W. J. & Hyung, Namwon, 2004. "Occasional structural breaks and long memory with an application to the S&P 500 absolute stock returns," Journal of Empirical Finance, Elsevier, vol. 11(3), pages 399-421, June.
When requesting a correction, please mention this item's handle: RePEc:mcl:mclwop:2006-13. 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: (Shama Rangwala)The email address of this maintainer does not seem to be valid anymore. Please ask Shama Rangwala to update the entry or send us the correct email address
If references are entirely missing, you can add them using this form.