A Comparison Of Forecasting Procedures For Macroeconomic Series: The Contribution Of Structural Break Models

This paper compares the forecasting performance of different models which have been proposed for forecasting in the presence of structural breaks. These models differ in their treatment of the break process, the parameters defining the model which applies in each regime and the out-of-sample probability of a break occurring. In an extensive empirical evaluation involving many important macroeconomic time series, we demonstrate the presence of structural breaks and their importance for forecasting in the vast majority of cases. However, we find no single forecasting model consistently works best in the presence of structural breaks. In many cases, the formal modeling of the break process is important in achieving good forecast performance. However, there are also many cases where simple, rolling OLS forecasts perform well.

A Comparison Of Forecasting Procedures For Macroeconomic Series: The Contribution Of Structural Break Models

This paper compares the forecasting performance of different models which have been proposed for forecasting in the presence of structural breaks. These models differ in their treatment of the break process, the parameters defining the model which applies in each regime and the out-of-sample probability of a break occurring. In an extensive empirical evaluation involving many important macroeconomic time series, we demonstrate the presence of structural breaks and their importance for forecasting in the vast majority of cases. However, we find no single forecasting model consistently works best in the presence of structural breaks. In many cases, the formal modeling of the break process is important in achieving good forecast performance. However, there are also many cases where simple, rolling OLS forecasts perform well.

Poor and Sick: Estimating the relationship between Household Income and Health

This study evaluates the effect of the individual‘s household income on their health at the later stages of working life. A structural equation model is utilised in order to derive a composite and continuous index of the latent health status from qualitative health status indicators. The endogenous relationship between health status and household income status is taken into account by using IV estimators. The findings reveal a significant effect of individual household income on health before and after endogeneity is taken into account and after a host of other factors which is known to influence health, including hereditary factors and the individual‘s locus of control. Importantly, it is also shown that the childhood socioeconomic position of the individual has long lasting effects on health as it appears to play a significant role in determining health during the later stages of working life.

Measuring the Economic Significance of Structural Exchange Rate Models

This paper examines both the in-sample and out-of-sample performance of three monetary fundamental models of exchange rates and compares their out-of-sample performance to that of a simple Random Walk model. Using a data-set consisting of five currencies at monthly frequency over the period January 1980 to December 2009 and a battery of newly developed performance measures, the paper shows that monetary models do better (in-sample and out-of-sample forecasting) than a simple Random Walk model.