Staff Report 21

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Improving Econometric Forecasts by Using Subperiod Data

Paul A. Anderson
Thomas M. Supel - Vice President

Published April 1, 1977

Abstract
The method proposed here includes two innovations which should improve the accuracy of econometric forecasting. First, it replaces the subjective, judgmental adjustments commonly used with a more formal, objective econometric procedure. Second, it includes a methodology for testing the usefulness of subperiod data which forecasters often inspect when choosing intercept adjustments. A sample application to the MIT-Penn-SSRC Model demonstrates that the procedure is both feasible and potentially helpful in the context of a large macroeconometric model.


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