The contribution of structural break models to forecasting macroeconomic series

Bauwens, L., Koop, G., Korobilis, D. and Rombouts, J. V.K. (2015) The contribution of structural break models to forecasting macroeconomic series. Journal of Applied Econometrics, 30(4), pp. 596-620. (doi: 10.1002/jae.2387)

Abstract

This paper compares the forecasting performance of different models which have been proposed for forecasting in the presence of structural breaks. These models differ in their treatment of the break process, the model which applies in each regime and the out-of-sample probability of a break occurring. In an extensive empirical evaluation involving 60 macroeconomic quarterly and monthly time series, we demonstrate the presence of structural breaks and their importance for forecasting in the vast majority of cases. We find no single forecasting model consistently works best in the presence of structural breaks. In many cases, the formal modeling of the break process is important in achieving good forecast performance. However, there are also many cases where simple, rolling window based forecasts perform well.

• Item Type: Articles
• Additional Information: This is the peer reviewed version of the following article: Bauwens, L., Koop, G., Korobilis, D., and Rombouts, J. V.K. (2015) The contribution of structural break models to forecasting macroeconomic series. Journal of Applied Econometrics, 30(4), pp. 596-620, which has been published in final form at http://dx.doi.org/10.1002/jae.2387. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Korompilis Magkas, Professor Dimitris
• Authors: Bauwens, L., Koop, G., Korobilis, D., and Rombouts, J. V.K.
• Subjects: H Social Sciences > HA Statistics
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Journal of Applied Econometrics
• Publisher: Wiley-Blackwell Publishing
• ISSN: 0883-7252
• ISSN (Online): 1099-1255
• Copyright Holders: Copyright © 2014 John Wiley & Sons, Ltd.
• First Published: First published in Journal of Applied Econometrics 30(4):596-620
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher