Forecast robustness in macroeconometric models
The paper investigates explanations for forecasting invariance to structural breaks. After highlighting the role of policy, we isolate possible structural invariance in a simplified dynamic macro model that nevertheless has features in common with the standard model of aggregate demand and aggregate supply. We find, as expected, that structural breaks in growth rates and in the means of cointegrating relationships will always damage some of the variables. But we also find examples of "insulation" from shocks. The results about partial robustness is a property of the economy itself (here represented by the DGP) and not of the forecasts.
|Date of creation:||06 Oct 2012|
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- Pesaran, M. Hashem & Pick, Andreas & Pranovich, Mikhail, 2013.
"Optimal forecasts in the presence of structural breaks,"
Journal of Econometrics,
Elsevier, vol. 177(2), pages 134-152.
- M Hashem Pesaran & Andreas Pick & Mikhail Pranovich, 2011. "Optimal Forecasts in the Presence of Structural Breaks," DNB Working Papers 327, Netherlands Central Bank, Research Department.
- Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, number 9780199246502, April.
- Bårdsen, Gunnar & den Reijer, Ard & Jonasson, Patrik & Nymoen, Ragnar, 2012. "MOSES: Model for studying the economy of Sweden," Economic Modelling, Elsevier, vol. 29(6), pages 2566-2582.
- Q. Farooq Akram & Ragnar Nymoen, 2009. "Model Selection for Monetary Policy Analysis: How Important is Empirical Validity?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 35-68, 02.
- Akram, Q. Farooq & Nymoen, Ragnar, 2007. "Model selection for monetary policy analysis How important is empirical validity?," Memorandum 14/2007, Oslo University, Department of Economics.
- Barkbu, Bergljot Bjornson & Nymoen, Ragnar & Roed, Knut, 2003. "Wage coordination and unemployment dynamics in Norway and Sweden," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(1), pages 37-58, March.
- Barkbu,B.B. & Nymoen,R. & Roed,K., 2001. "Wage coordination and unemployment dynamics in Norway and Sweden," Memorandum 11/2001, Oslo University, Department of Economics.
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