Paper #1476

Title:

Forecasting in nonstationary environments: What works and what doesn't in reduced-form and structural models

Authors:

Raffaella Giacomini and Barbara Rossi

Date:

December 2014

Abstract:

This review provides an overview of forecasting methods that can help researchers forecast in the presence of non-stationarities caused by instabilities. The emphasis of the review is both theoretical and applied, and provides several examples of interest to economists. We show that modeling instabilities can help, but it depends on how they are modeled. We also show how to robustify a model against instabilities.

Keywords:

Forecasting, instabilities, structural breaks.

Area of Research:

Macroeconomics and International Economics / Statistics, Econometrics and Quantitative Methods

Published in:

Annual Review of Economics, 7, 207-229, 2015

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