Journal Article

Vector autoregressions as a tool for forecast evaluations

Abstract: In his article, Vector Autoregressions as a Tool for Forecast Evaluation, Roy H. Webb proposes that VAR forecasts be used as a standard of comparison for other forecasts. He begins by explaining how conventional forecasting models are constructed and used, and summarizes a few common objections to these models. He then describes the VAR methodology and compares forecasts from a simple VAR model with those from a consulting firm that uses a conventional model and with a series of consensus forecasts. The VAR model holds its own in this competition; in fact, only the VAR model is able to predict the 1981-1982 recession one year before its occurrence.

Keywords: Forecasting;

Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Economic Review

Publication Date: 1984

Volume: 70

Issue: Jan

Pages: 3-11