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Forecasting with Measurement Errors in Dynamic Models

Author

Listed:
  • Richard Harrison

    (Bank of England)

  • George Kapetanios

    (Queen Mary, University of London)

Abstract

In this paper we explore the consequences for forecasting of the following two facts: first, that over time statistical agencies revise and improve published data, so that observations on more recent events are those that are least well measured. Second, that economies are such that observations on the most recent events contain the the largest signal about the future. We discuss a variety of forecasting problems in this environment, and present an application using a univariate model of the quarterly growth of UK private consumption expenditure.

Suggested Citation

  • Richard Harrison & George Kapetanios, 2004. "Forecasting with Measurement Errors in Dynamic Models," Working Papers 521, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:521
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    References listed on IDEAS

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    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Alastair Cunningham & Jana Eklund & Chris Jeffery & George Kapetanios & Vincent Labhard, 2009. "A State Space Approach to Extracting the Signal From Uncertain Data," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(2), pages 173-180, March.
    2. Stekler, H.O., 2007. "The future of macroeconomic forecasting: Understanding the forecasting process," International Journal of Forecasting, Elsevier, vol. 23(2), pages 237-248.
    3. Andrea Silvestrini & Matteo Salto & Laurent Moulin & David Veredas, 2008. "Monitoring and forecasting annual public deficit every month: the case of France," Empirical Economics, Springer, vol. 34(3), pages 493-524, June.
    4. Fabio Busetti, 2006. "Preliminary data and econometric forecasting: an application with the Bank of Italy Quarterly Model," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 25(1), pages 1-23.
    5. Alastair Cunningham & Jana Eklund & Chris Jeffery & George Kapetanios & Vincent Labhard, 2009. "A State Space Approach to Extracting the Signal From Uncertain Data," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(2), pages 173-180, March.
    6. Clements, Michael P. & Beatriz Galvao, Ana, 2010. "Real-time Forecasting of Inflation and Output Growth in the Presence of Data Revisions," Economic Research Papers 270771, University of Warwick - Department of Economics.
    7. Dean Croushore, 2011. "Frontiers of Real-Time Data Analysis," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 72-100, March.
    8. Juan Manuel Julio Román, 2011. "Modeling Data Revisions," Borradores de Economia 7929, Banco de la Republica.
    9. Emilia Tomczyk, 2013. "End of sample vs. real time data: perspectives for analysis of expectations," Working Papers 68, Department of Applied Econometrics, Warsaw School of Economics.
    10. Valentina Raponi & Cecilia Frale, 2014. "Revisions in official data and forecasting," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 23(3), pages 451-472, August.
    11. Clements Michael P., 2012. "Forecasting U.S. Output Growth with Non-Linear Models in the Presence of Data Uncertainty," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 16(1), pages 1-27, January.
    12. George Kapetanios, 2004. "Estimating Time-Variation in Measurement Error from Data Revisions: An Application to Forecasting in Dynamic Models," Working Papers 520, Queen Mary University of London, School of Economics and Finance.
    13. George Kapetanios & Tony Yates, 2004. "Estimating time-variation in measurement error from data revisions; an application to forecasting in dynamic models," Bank of England working papers 238, Bank of England.
    14. George Kapetanios & Tony Yates, 2010. "Estimating time variation in measurement error from data revisions: an application to backcasting and forecasting in dynamic models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(5), pages 869-893.
    15. Alastair Cunningham & Chris Jeffery & George Kapetanios & Vincent Labhard, 2007. "A State Space Approach To The Policymaker's Data Uncertainty Problem," Money Macro and Finance (MMF) Research Group Conference 2006 168, Money Macro and Finance Research Group.
    16. Paul Downward & Andrew Mearman, 2008. "Decision-making at the Bank of England: a critical appraisal," Oxford Economic Papers, Oxford University Press, vol. 60(3), pages 385-409, July.
    17. Cecilia Frale & Valentina Raponi, 2011. "Revisions in ocial data and forecasting," Working Papers LuissLab 1194, Dipartimento di Economia e Finanza, LUISS Guido Carli.

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    More about this item

    Keywords

    Forecasting; Data revisions; Dynamic models;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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