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Economic Forecasting: Some Lessons from Recent Research

  • David Hendry
  • Michael P. Clements

This paper describes some recent advances and contributions to our understanding of economic forecasting. The framework we develop helps explain the findings of forecasting competitions and the prevalence of forecast failure. It constitutes a general theoretical background against which recent results can be judged. We compare this framework to a previous formulation, which was silent on the very issues of most concern to the forecaster. We describe a number of aspects which it illuminates, and draw out the implications for model selection. Finally, we discuss the areas where research remains needed to clarify empirical findings which lack theoretical explanations.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 78.

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Date of creation: 01 Oct 2001
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Handle: RePEc:oxf:wpaper:78
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