Is forecasting with large models informative? Assessing the role of judgement in macroeconomic forecasts
✍ Scribed by Ricardo Mestre; Peter McAdam
- Publisher
- John Wiley and Sons
- Year
- 2010
- Tongue
- English
- Weight
- 210 KB
- Volume
- 30
- Category
- Article
- ISSN
- 0277-6693
- DOI
- 10.1002/for.1173
No coin nor oath required. For personal study only.
✦ Synopsis
We evaluate residual projection strategies in the context of a large-scale macro model of the euro area and smaller benchmark time-series models. The exercises attempt to measure the accuracy of model-based forecasts simulated both out-of-sample and in-sample. Both exercises incorporate alternative residualprojection methods, to assess the importance of unaccounted-for breaks in forecast accuracy and off-model judgement. Conclusions reached are that simple mechanical residual adjustments have a signifi cant impact on forecasting accuracy irrespective of the model in use, likely due to the presence of breaks in trends in the data. The testing procedure and conclusions are applicable to a wide class of models and of general interest.