Measuring Uncertainty about Long-Run Predictions

Measuring Uncertainty about Long-Run Predictions. Müller, U. K. & Watson, M. W. The Review of Economic Studies, 83(4):1711–1740, October, 2016.

Paper doi abstract bibtex

Long-run forecasts of economic variables play an important role in policy, planning, and portfolio decisions. We consider forecasts of the long-horizon average of a scalar variable, typically the growth rate of an economic variable. The main contribution is the construction of prediction sets with asymptotic coverage over a wide range of data generating processes, allowing for stochastically trending mean growth, slow mean reversion and other types of long-run dependencies. We illustrate the method by computing prediction sets for 10 to 75 year average growth rates of U.S. real per-capita GDP and consumption, productivity, price level, stock prices and population.

@article{muller_measuring_2016,
	title = {Measuring {Uncertainty} about {Long}-{Run} {Predictions}},
	volume = {83},
	issn = {0034-6527, 1467-937X},
	url = {https://academic.oup.com/restud/article-lookup/doi/10.1093/restud/rdw003},
	doi = {10.1093/restud/rdw003},
	abstract = {Long-run forecasts of economic variables play an important role in policy, planning, and portfolio decisions. We consider forecasts of the long-horizon average of a scalar variable, typically the growth rate of an economic variable. The main contribution is the construction of prediction sets with asymptotic coverage over a wide range of data generating processes, allowing for stochastically trending mean growth, slow mean reversion and other types of long-run dependencies. We illustrate the method by computing prediction sets for 10 to 75 year average growth rates of U.S. real per-capita GDP and consumption, productivity, price level, stock prices and population.},
	language = {en},
	number = {4},
	urldate = {2017-05-24},
	journal = {The Review of Economic Studies},
	author = {Müller, Ulrich K. and Watson, Mark W.},
	month = oct,
	year = {2016},
	keywords = {KR, Untagged},
	pages = {1711--1740},
}

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