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Unpredictability in Economic Analyis, Econometric Modelling and Forecasting

Author

Listed:
  • David Hendry
Abstract
Unpredictability arises from intrinsic stochastic variation, unexpected instances of outliers, and unanticipated extrinsic shifts of distributions. We analyze their properties, relationships, and different effects on the three arenas in the title, which suggests considering three associated information sets. We note the implications of unanticipated shifts for forecasting, economic analyses of efficient markets, inter-temporal derivations, and general-to-specific model selection, tackling outliers and non-constancy by impulse-indicator saturation, and contrast the potential success in modeling breaks with the major difficulties confronting forecasting.

Suggested Citation

  • David Hendry, 2011. "Unpredictability in Economic Analyis, Econometric Modelling and Forecasting," Economics Series Working Papers 551, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:551
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Unpredictability; 'Black Swans'; Distributional shifts; forecasting; Model selection;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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