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Evaluating real-time forecasts in real-time

Author

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  • van Dijk, D.J.C.
  • Franses, Ph.H.B.F.
  • Ravazzolo, F.

Abstract

The accuracy of real-time forecasts of macroeconomic variables that are subject to revisions may crucially depend on the choice of data used to compare the forecasts against. We put forward a flexible time-varying parameter regression framework to obtain early estimates of the final value of macroeconomic variables based upon the initial data release that may be used as actuals in current forecast evaluation. We allow for structural changes in the regression parameters to accommodate benchmark revisions and definitional changes, which fundamentally change the statistical properties of the variable of interest, including the relationship between the final value and the initial release. The usefulness of our approach is demonstrated through an empirical application comparing the accuracy of forecasts of US GDP growth rates from the Survey of Professional Forecasters and the Greenbook.

Suggested Citation

  • van Dijk, D.J.C. & Franses, Ph.H.B.F. & Ravazzolo, F., 2007. "Evaluating real-time forecasts in real-time," Econometric Institute Research Papers EI 2007-33, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    • Handle: RePEc:ems:eureir:10467
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    References listed on IDEAS

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    Cited by:

    1. Clements, Michael P. & Beatriz Galvão, Ana, 2010. "First announcements and real economic activity," European Economic Review, Elsevier, vol. 54(6), pages 803-817, August.

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    More about this item

    Keywords

    Bayesian estimation; data revision; forecast evaluation; parameter uncertainty; structural breaks;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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