Forecasting Economic Time Series

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Cambridge University Press, Oct 8, 1998 - Business & Economics - 368 pages
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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.
 

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Contents

Evaluating forecast accuracy
52
Forecasting in univariate processes
79
Monte Carlo techniques
107
Forecasting in cointegrated systems
119
Forecasting with largescale macroeconometric models
157
A taxonomy of forecast errors
163
beyond mechanistic forecasts
180
Forecasting using leading indicators
207
Combining forecasts
227
Multistep estimation
243
Parsimony
280
Testing forecast accuracy
312
Glossary
335
Author index
359
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