Macroeconomic Forecasts Under The Prism Of Error-Correction Models

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Research Papers

Macroeconomic Forecasts Under The Prism Of Error-Correction Models

September 1997 Number 9728

Author: Angelos A. Antzoulatos

When the error correction term exhibits persistence, its change may convey useful information about short-run economic dynamics, which, if not taken sufficiently into account by a forecasting model, could be associated with predictable forecast errors. Such errors are documented in the DRI forecasts for the U.S. consumption, GNP and imports. The strong results, together with the very general assumptions behind the theoretical framework, suggest that similar predictable errors may be pervasive in the forecasts of other large-scale econometric models. Key Words: Error Correction Models, Forecasting, Consumption, GNP, Imports.

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