Forecasting in Nonstationary Environments: What Works and What Doesn't in Reduced-Form and Structural Models

Posted: 7 Aug 2015

See all articles by Raffaella Giacomini

Raffaella Giacomini

University College London - Department of Economics; University of California, Los Angeles - Department of Economics

Barbara Rossi

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Barcelona Graduate School of Economics

Date Written: August 2015

Abstract

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

Suggested Citation

Giacomini, Raffaella and Rossi, Barbara, Forecasting in Nonstationary Environments: What Works and What Doesn't in Reduced-Form and Structural Models (August 2015). Annual Review of Economics, Vol. 7, pp. 207-229, 2015, Available at SSRN: https://ssrn.com/abstract=2640067 or http://dx.doi.org/10.1146/annurev-economics-080614-115338

Raffaella Giacomini (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

University of California, Los Angeles - Department of Economics ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095-1361
United States

Barbara Rossi

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Barcelona Graduate School of Economics ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

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