An analysis of RSQE forecasts: 1971–1992 |
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Authors: | E Philip Howrey |
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Institution: | (1) The University of Michigan, Ann Arbor |
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Abstract: | The purpose of this paper is to evaluate the accuracy of ex ante econometric model forecasts of four key macroeconomic variables:
real GNP growth, the rate of price inflation measured by the GNP deflator, the civilian unemployment rate, and the Treasury
Bill rate. Annual forecasts produced by the Research Seminar in Quantitative Economics (RSQE) based on the Michigan Quarterly
Econometric Model of the U.S. Economy are compared with quasi ex ante forecasts from a four-variable vector autoregressive
(VAR) model. Statistical tests of the equality of forecast error variances as well as univariate and multivariate forecast
encompassing-type tests are conducted. The forecast error variance comparisons indicate that for three of the four variables
the RSQE forecasts are more accurate than the VAR forecasts and for one of the variables (real GNP growth) only slightly less
accurate. The forecast encompassing-type tests indicate that the RSQE forecasts contain information not contained in the VAR
forecasts and, conversely, that VAR forecasts contain information not included in the RSQE forecasts. The scope for improving
RSQE forecasts by combining them with VAR forecasts is rather limited, however. |
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Keywords: | |
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