Measuring uncertainty about long-run predictions

Research output: Contribution to journalArticle

17 Scopus citations

Abstract

Long-run forecasts of economic variables play an important role in policy, planning, and portfolio decisions. We consider forecasts of the long-horizon average of a scalar variable, typically the growth rate of an economic variable. The main contribution is the construction of prediction sets with asymptotic coverage over a wide range of data generating processes, allowing for stochastically trending mean growth, slow mean reversion, and other types of long-run dependencies. We illustrate the method by computing prediction sets for 10- to 75-year average growth rates of U.S. real per capita GDP and consumption, productivity, price level, stock prices, and population.

Original languageEnglish (US)
Article numberrdw003
Pages (from-to)1711-1740
Number of pages30
JournalReview of Economic Studies
Volume83
Issue number4
DOIs
StatePublished - Oct 1 2016

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • Least favourable distribution
  • Low frequency
  • Prediction interval
  • Spectral analysis

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