Forecasting with equilibrium-correction models during structural breaks
When location shifts occur, cointegration-based equilibrium-correction models (EqCMs) face forecasting problems. We consider alleviating such forecast failure by updating, intercept corrections, differencing, and estimating the future progress of an 'internal' break. Updating leads to a lo...
| Главные авторы: | , , |
|---|---|
| Формат: | Journal article |
| Опубликовано: |
Elsevier
2010
|
| _version_ | 1826306005271576576 |
|---|---|
| author | Castle, J Fawcett, N Hendry, D |
| author_facet | Castle, J Fawcett, N Hendry, D |
| author_sort | Castle, J |
| collection | OXFORD |
| description | When location shifts occur, cointegration-based equilibrium-correction models (EqCMs) face forecasting problems. We consider alleviating such forecast failure by updating, intercept corrections, differencing, and estimating the future progress of an 'internal' break. Updating leads to a loss of cointegration when an EqCM suffers an equilibrium-mean shift, but helps when collinearities are changed by an 'external' break with the EqCM staying constant. Both mechanistic corrections help compared to retaining a pre-break estimated model, but an estimated model of the break process could outperform. We apply the approaches to EqCMs for UK M1, compared with updating a learning function as the break evolves. |
| first_indexed | 2024-03-07T06:41:22Z |
| format | Journal article |
| id | oxford-uuid:f9656b10-65ea-4d23-9f58-6c48319da49e |
| institution | University of Oxford |
| last_indexed | 2024-03-07T06:41:22Z |
| publishDate | 2010 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | oxford-uuid:f9656b10-65ea-4d23-9f58-6c48319da49e2022-03-27T12:57:38ZForecasting with equilibrium-correction models during structural breaksJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:f9656b10-65ea-4d23-9f58-6c48319da49eSymplectic Elements at OxfordElsevier2010Castle, JFawcett, NHendry, DWhen location shifts occur, cointegration-based equilibrium-correction models (EqCMs) face forecasting problems. We consider alleviating such forecast failure by updating, intercept corrections, differencing, and estimating the future progress of an 'internal' break. Updating leads to a loss of cointegration when an EqCM suffers an equilibrium-mean shift, but helps when collinearities are changed by an 'external' break with the EqCM staying constant. Both mechanistic corrections help compared to retaining a pre-break estimated model, but an estimated model of the break process could outperform. We apply the approaches to EqCMs for UK M1, compared with updating a learning function as the break evolves. |
| spellingShingle | Castle, J Fawcett, N Hendry, D Forecasting with equilibrium-correction models during structural breaks |
| title | Forecasting with equilibrium-correction models during structural breaks |
| title_full | Forecasting with equilibrium-correction models during structural breaks |
| title_fullStr | Forecasting with equilibrium-correction models during structural breaks |
| title_full_unstemmed | Forecasting with equilibrium-correction models during structural breaks |
| title_short | Forecasting with equilibrium-correction models during structural breaks |
| title_sort | forecasting with equilibrium correction models during structural breaks |
| work_keys_str_mv | AT castlej forecastingwithequilibriumcorrectionmodelsduringstructuralbreaks AT fawcettn forecastingwithequilibriumcorrectionmodelsduringstructuralbreaks AT hendryd forecastingwithequilibriumcorrectionmodelsduringstructuralbreaks |