An Empirical Evaluation of Some Long-Horizon Macroeconomic Forecasts

RePEc Short ID: plu377
ORCID iD: 0000-0003-1632-2648

Lunsford, Kurt Graden; West, Kenneth D.

doi:10.26509/frbc-wp-202420

Working Paper

An Empirical Evaluation of Some Long-Horizon Macroeconomic Forecasts

Abstract: We use long-run annual cross-country data for 10 macroeconomic variables to evaluate the long-horizon forecast distributions of six forecasting models. The variables we use range from ones having little serial correlation to ones having persistence consistent with unit roots. Our forecasting models include simple time series models and frequency domain models developed in Müller and Watson (2016). For plausibly stationary variables, an AR(1) model and a frequency domain model that does not require the user to take a stand on the order of integration appear reasonably well calibrated for forecast horizons of 10 and 25 years. For plausibly non-stationary variables, a random walk model appears reasonably well calibrated for forecast horizons of 10 and 25 years. No model appears well calibrated for forecast horizons of 50 years.

Keywords: fractional integration; forecast interval; low frequency;

JEL Classification: C22; C53; E17;

https://doi.org/10.26509/frbc-wp-202420