Multivariate Forecast Evaluation And Rationality Testing

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: In this paper, we propose a new family of multivariate loss functions that can be used to test the rationality of vector forecasts without assuming independence across individual variables. When only one variable is of interest, the loss function reduces to the flexible asymmetric family recently proposed by Elliott, Komunjer, and Timmermann (2005). Following their methodology, we derive a GMM test for multivaariate forecast rationality that allows the forecast errors to be dependent, and takes into account forecast estimation ucertainty. We use our test to study the rationality of macroeconomic vector forecasts in the growth rate in nominal output, the CPI inflation rate, and a short-term interest rate.

Keywords: multivariate forecast rationality; multivariate loss; asymmetries; Fed Transparency (search for similar items in EconPapers)
Date: 2007-11-01
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Multivariate Forecast Evaluation and Rationality Testing (2012)
Working Paper: Multivariate forecast evaluation and rationality testing (2007)
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