Forecasting Economic Time Series

by Michael Clements , David Hendry

• ISBN13: 9780521634809
• ISBN10: 0521634806
• Format: Paperback
• Copyright: 1998-11-28
• Publisher: Cambridge University Press

Summary

This book provides a formal analysis of the models, procedures, and measures of economic forecasting with a view to improving forecasting practice. David Hendry and Michael Clements base the analyses on assumptions pertinent to the economies to be forecast, viz. a non-constant, evolving economic system, and econometric models whose form and structure are unknown a priori. The authors find that conclusions which can be established formally for constant-parameter stationary processes and correctly-specified models often do not hold when unrealistic assumptions are relaxed. Despite the difficulty of proceeding formally when models are mis-specified in unknown ways for non-stationary processes that are subject to structural breaks, Hendry and Clements show that significant insights can be gleaned. For example, a formal taxonomy of forecasting errors can be developed, the role of causal information clarified, intercept corrections re-established as a method for achieving robustness against forms of structural change, and measures of forecast accuracy re-interpreted.

Table of Contents

1. An introduction to economic forecasting

2. First principles

3. Evaluating forecast accuracy

4. Forecasting in univariate processes

5. Monte Carlo techniques

6. Forecasting in co-intergrated systems

7. Forecasting with large-scale macro-econometric models

8. A theory of intercept corrections: beyond mechanistic forecasts

9. Forecasting using leading indicators

10. Combining forecasts

11. Multi-step estimation

12. Parsimony

13. Testing forecast accuracy

14. Postscript.