Long-run restrictions and survey forecasts of output, consumption and investment

Clements, M. P. ORCID: https://orcid.org/0000-0001-6329-1341 (2016) Long-run restrictions and survey forecasts of output, consumption and investment. International Journal of Forecasting, 32 (3). pp. 614-628. ISSN 0169-2070 doi: 10.1016/j.ijforecast.2015.10.005

Abstract/Summary

We consider the extent to which long-horizon survey forecasts of consumption, investment and output growth are consistent with theory-based steady-state values, and whether imposing these restrictions on long-horizon forecasts will enhance their accuracy. The restrictions we impose are consistent with a two-sector model in which the variables grow at different rates in steady state. The restrictions are imposed by exponential-tilting of simple auxiliary forecast densities. We show that imposing the consumption-output restriction yields modest improvements in the long-horizon output growth forecasts, and larger improvements in the forecasts of the cointegrating combination of consumption and output: the transformation of the data on which accuracy is assessed plays an important role.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/45303
Identification Number/DOI	10.1016/j.ijforecast.2015.10.005
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Elsevier
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