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Do Economic Restrictions Improve Forecasts?

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  • Murphy, Elizabeth
  • Norwood, Bailey
  • Wohlgenant, Michael

Abstract

A previous study showed that imposing economic restrictions improves the forecasting ability of food demand systems, thus warranting their use even when they are rejected in-sample. This article evaluates whether this result is due to economic restrictions enhancing degrees of freedom or containing nonsample information. Results indicate that restrictions improve forecasting ability even when they are not derived from economic theory, but theoretical restrictions forecast best.

Suggested Citation

  • Murphy, Elizabeth & Norwood, Bailey & Wohlgenant, Michael, 2004. "Do Economic Restrictions Improve Forecasts?," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 36(3), pages 549-558, December.
    • Handle: RePEc:cup:jagaec:v:36:y:2004:i:03:p:549-558_02
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    References listed on IDEAS

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    1. Ashley, R & Granger, C W J & Schmalensee, R, 1980. "Advertising and Aggregate Consumption: An Analysis of Causality," Econometrica, Econometric Society, vol. 48(5), pages 1149-1167, July.
    2. Terry L. Kastens & Gary W. Brester, 1996. "Model Selection and Forecasting Ability of Theory-Constrained Food Demand Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 301-312.
    3. Sawa, Takamitsu, 1978. "Information Criteria for Discriminating among Alternative Regression Models," Econometrica, Econometric Society, vol. 46(6), pages 1273-1291, November.
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    Cited by:

    1. Andrew Muhammad & Richard L. Kilmer, 2008. "The impact of EU export subsidy reductions on U.S. dairy exports," Agribusiness, John Wiley & Sons, Ltd., vol. 24(4), pages 557-574.

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    More about this item

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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