Creator: Muench, Thomas J., Rolnick, Arthur J., 1944-, Wallace, Neil, and Weiler, William Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 019 Abstract:
Prediction interval tests are applied to the reduced forms of two quarterly models of the U.S. (the "old" FRB-MIT model and the Michigan model). The results illustrate the range of tests one can perform on an estimated simultaneous equation model. In particular, the tests determine whether ex post forecast errors can be attributed to structural deficiencies of the models. The paper examines confidence regions and other aspects of forecast distributions-comparisons between mean forecasts and nonstochastic forecasts, comparisons between, forecast variances from multiperiod endogenous simulations and those from one period simulations, and comparisons between forecast variances and residual variances.
Keyword: Michigan quarterly model, FRB-MIT quarterly model, and Monte Carlo experiment Subject (JEL): C53 - Forecasting Models; Simulation Methods, C52 - Model Evaluation, Validation, and Selection, and C30 - Multiple or Simultaneous Equation Models; Multiple Variables: General
Creator: Anderson, Paul A. and Supel, Thomas M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 039 Abstract:
This paper puts forward a method for improving the forecasting accuracy of an existing macroeconometric model without changing its policy response characteristics. The procedure is an extension and formalization of the practice of additive adjustments currently used by most forecasters. The method should be of special interest to forecasters who use models built by other investigators because it does not involve reestimation of the original model and uses only information routinely included in the documentation available to model users. The paper ends with a demonstration of the prediction improvement realized by application of this method to a version of the MIT-Penn-SSRC (MPS) model.
Keyword: Multiperiod forecasting, MIT-Penn-SSRC model, MIT-Penn-MPS model, and Prediction Subject (JEL): C53 - Forecasting Models; Simulation Methods and C52 - Model Evaluation, Validation, and Selection