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Multi-step forecasting in unstable economies: robustness issues in the presence of location shifts

Abstract:

To forecast at several, say h, periods into the future, a modeller faces two techniques: iterating one-step ahead forecasts (the IMS technique) or directly modelling the relation between observations separated by an h-period interval and using it for forecasting (DMS forecasting). It is known that unit-root non-stationarity and residual autocorrelation benefit DMS accuracy in finite samples. We analyze here the effect of structural breaks as observed in unstable economies, and show that the b...

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Publication status:
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Publisher:
University of Oxford
Series:
Department of Economics Discussion Paper Series
Publication date:
2006-02-01
Paper number:
257
Keywords:
Pubs id:
1144170
Local pid:
pubs:1144170
Deposit date:
2020-12-15

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