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The contribution of structural break models to forecasting macroeconomic series

Bauwens, L and Koop, G and Korobilis, D and Rombouts, JVK (2015) 'The contribution of structural break models to forecasting macroeconomic series.' Journal of Applied Econometrics, 30 (4). pp. 596-620. ISSN 0883-7252

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Abstract

This paper compares the forecasting performance of different models which have been proposed for forecasting in the presence of structural breaks. These models differ in their treatment of the break process, the model which applies in each regime and the out-of-sample probability of a break occurring. In an extensive empirical evaluation involving 60 macroeconomic quarterly and monthly time series, we demonstrate the presence of structural breaks and their importance for forecasting in the vast majority of cases. We find no single forecasting model consistently works best in the presence of structural breaks. In many cases, the formal modeling of the break process is important in achieving good forecast performance. However, there are also many cases where simple, rolling window based forecasts perform well.

Item Type: Article
Additional Information: This is the peer reviewed version of the following article: Bauwens, L., Koop, G., Korobilis, D., and Rombouts, J. V.K. (2015) The contribution of structural break models to forecasting macroeconomic series. Journal of Applied Econometrics, 30(4), pp. 596-620, which has been published in final form at http://dx.doi.org/10.1002/jae.2387. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Uncontrolled Keywords: C11; C22; C53; Forecasting; change-points; Markov switching; Bayesian inference
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 23 Nov 2016 11:53
Last Modified: 15 Jan 2022 01:02
URI: http://repository.essex.ac.uk/id/eprint/17947

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