Evidence on Structural Instability in Macroeconomic Time Series Relations / James H. Stock, Mark W. Watson.

Format:

Book

Author/Creator:

Stock, James H.

Contributor:

National Bureau of Economic Research.

Watson, Mark W.

Series:

Technical Working Paper Series (National Bureau of Economic Research) no. t0164.

NBER technical working paper series no. t0164

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1994.

Summary:

An experiment is performed to assess the prevalence of instability in univariate and bivariate macroeconomic time series relations and to ascertain whether various adaptive forecasting techniques successfully handle any such instability. Formal tests for instability and out-of-sample forecasts from sixteen different models are computed using a sample of 76 representative U.S. monthly postwar macroeconomic time series, constituting 5700 bivariate forecasting relations. The tests indicate widespread instability in univariate and bivariate autoregressive models. However, adaptive forecasting models, in particular time varying parameter models, have limited success in exploiting this instability to improve upon fixed-parameter or recursive autoregressive forecasts.

Notes:

Print version record

September 1994.