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Activity Number:
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573
- Time Series:Testing and Forecasting
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Type:
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Topic Contributed
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Date/Time:
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Thursday, August 6, 2020 : 3:00 PM to 4:50 PM
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Sponsor:
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Business and Economic Statistics Section
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Abstract #313065
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Title:
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Testing for Differences in Path Forecast Accuracy
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Author(s):
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Andrew Martinez*
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Companies:
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U.S. Department of the Treasury
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Keywords:
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joint density;
log determinant;
loss function;
mean square error
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Abstract:
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Path forecasts help guide many important policy decisions from monetary policy to weather responses. However, analyses of forecast accuracy often focus on one horizon at a time and ignore the dynamics along the path. I propose two tests of path forecast accuracy which specify the joint density as a general loss function to capture differences in forecast dynamics. Simulations highlight the benefits and trade-offs of the proposed tests over existing alternatives. I apply the path tests in two cases: (1) evaluating macroeconomic path forecasts; and (2) the accuracy of Hurricane Irma’s predicted path in 2017. The results illustrate that differences in the forecast-error dynamics drive overall differences in path forecast accuracy.
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Authors who are presenting talks have a * after their name.
