Forecasting in the presence of instabilities: how do we know whether models predict well and how to improve them
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- dc.contributor.author Rossi, Barbara, 1971-
- dc.date.accessioned 2021-09-07T11:34:25Z
- dc.date.available 2021-09-07T11:34:25Z
- dc.date.issued 2021-07
- dc.description.abstract This article provides guidance on how to evaluate and improve the forecasting ability of models in the presence of instabilities, which are widespread in economic time series. Empirically relevant examples include predicting the financial crisis of 2007-2008, as well as, more broadly, fluctuations in asset prices, exchange rates, output growth and inflation. In the context of unstable environments, I discuss how to assess models' forecasting ability; how to robustify models' estimation; and how to correctly report measures of forecast uncertainty. Importantly, and perhaps surprisingly, breaks in models' parameters are neither necessary nor sufficient to generate time variation in models' forecasting performance: thus, one should not test for breaks in models' parameters, but rather evaluate their forecasting ability in a robust way. In addition, local measures of models' forecasting performance are more appropriate than traditional, average measures.ca
- dc.format.mimetype application/pdf*
- dc.identifier.uri http://hdl.handle.net/10230/48402
- dc.language eng
- dc.language.iso engca
- dc.rights.accessRights info:eu-repo/semantics/openAccessca
- dc.subject.other Forecastingca
- dc.subject.other Instabilitiesca
- dc.subject.other Time variationca
- dc.subject.other Inflationca
- dc.subject.other Structural breaksca
- dc.subject.other Density forecastsca
- dc.subject.other Great recessionca
- dc.subject.other Forecast confidence intervalsca
- dc.subject.other Output growthca
- dc.subject.other Business cyclesca
- dc.title Forecasting in the presence of instabilities: how do we know whether models predict well and how to improve themca
- dc.type info:eu-repo/semantics/workingPaperca
- dc.type.version info:eu-repo/semantics/draftca