Forecasting from mis-specified models in the presence of unanticipated location shifts

Working paper

This chapter describes the issues confronting any realistic context for economic forecasting, which is inevitably based on unknowingly mis-specified models, usually estimated from mis-measured data, facing intermittent and often unanticipated location shifts. We focus on mitigating the systematic forecast failures that result in such settings, and describe the background to our approach, the difficulties of evaluating forecasts, and the devices that are more robust when change occurs.

Authors: Hendry, D; Clements, M

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Publication date: 2010-05-01
• Paper number: 484
• Keywords: location shifts; mis-specified models; economic forecasting; robust forecasts