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Forecasting with Difference-Stationary and Trend-Stationary Models

Author

Listed:
  • Clements, M.P.
  • Hendry, D.P.

Abstract

The behavior of difference-stationary and trend-stationary processes has been the subject of considerable analysis in the literature. Nevertheless, there do not seem to be any direct comparisons of properties of each for both being potential data-generation processes. We look at the consequences of incorrect choice between these models for forecasting when parameters are known, and when parameters have to be estimated. The outcomes are surprisingly different from established results.

Suggested Citation

  • Clements, M.P. & Hendry, D.P., 1998. "Forecasting with Difference-Stationary and Trend-Stationary Models," The Warwick Economics Research Paper Series (TWERPS) 516, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:516
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/1995-1998/twerp516.pdf
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    Keywords

    TIME SERIES ; STATISTICAL ANALYSIS ; ECONOMETRICS;
    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

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