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Forecasting in the Presence of Structural Breaks and Policy Regime Shifts.

Abstract:

The value of selecting the best forecasting model as the basis for empirical economic policy analysis is questioned. When no model coincides with the data generation process, non-causal statistical devices may provide the best available forecasts: examples from recent work include intercept corrections and differenced-data VARs. However, the resulting models need have no policy implications. A 'paradox' may result if their forecasts induce policy changes which can be used to improve the stati...

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David Hendry More by this author
Grayham E Mizon More by this author
Volume:
W12
Series:
Economics Working Papers
Publication date:
2002
URN:
uuid:c530b253-fe1f-4d6a-96ee-b6fb0e1e71df
Local pid:
oai:economics.ouls.ox.ac.uk:11911
Language:
English

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