Forecasting Non-Stationary Economic Time Series (Zeuthen Lectures)
Publisher: The MIT Press
Published: September 24, 1999
Language: eng
Format: Hardcover
Number of pages: 392
ISBN-13: 9780262032728
Subjects: Time Series Analysis; Business & Economics; Business / Economics / Finance; Business/Economics; Econometrics; Economics - General; Business & Economics / Economics / General; Probability & Statistics - General; Economic Forecasting; Statistical methods; Time-series analysis
Description: "In their second book on economic forecasting, Michael P. Clements and David F. Hendry ask why some practices seem to work empirically despite a lack of formal support from theory. After reviewing the conventional approach to economic forecasting, they look at the implications for causal modeling, present a taxonomy of forecast errors, and delineate the sources of forecast failure.

They show that forecast-period shifts in deterministic factors - interacting with model misspecification, collinearity, and inconsistent estimation - are the dominant source of systematic failure. They then consider various approaches for avoiding systematic forecasting errors, including intercept corrections, differencing, co-breaking, and modeling regime shifts; they emphasize the distinction between equilibrium correction (based on cointegration) and error correction (automatically offsetting past errors). Finally, they present three applications to test the implications of their framework.

Their results on forecasting have wider implications for the conduct of empirical econometric research, model formulation, the testing of economic hypotheses, and model-based policy analyses."--BOOK JACKET.