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Comment on "Economic Forecasting in a Changing World" (by Michael Clements and David Hendry)
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October 24, 2008
Michael Clements and David Hendry make realistic assumptions about the nature of the economy and the models used to forecast it. Under those assumptions, Clements and Hendry clarify why forecasting models work when they do, and why they don't work when they don't. Their research also suggests how to improve the forecasting abilities of existing models.A taxonomy of the sources of forecast error underpins Clements and Hendry's analysis. In my comments, I summarize their taxonomy; illustrate several implications, including for predictable and unpredictable forecast uncertainty; and re-examine forecast criteria, focusing on how mean square forecast errors can mislead.
Published Online: 2008-10-24
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Article
- Economic Forecasting in a Changing World
- Household Debt in the Consumer Age: Source of Growth--Risk of Collapse
- The Historical Origins of 'Open Science': An Essay on Patronage, Reputation and Common Agency Contracting in the Scientific Revolution
- Discussion and Commentary
- Comment on "Economic Forecasting in a Changing World" (by Michael Clements and David Hendry)
- Comment on "Household Debt in the Consumer Age: Source of Growth--Risk of Collapse" (by Barry Z. Cynamon and Steven M. Fazzari)
- Comment on "The Historical Origins of 'Open Science'" (by Paul David)
- Reader Response
- Comment on 'Technological Revolutions and the Evolution of Industrial Structures' (by Giovanni Dosi, Alfonso Gambardella, Marco Grazzi, and Luigi Orsenigo)
