Testing Forecast Accuracy

Despite the obvious desirability of formal testing procedures, earlier efforts at assessing the forecast accuracy of an estimated model revolved around the calculation of summary forecast error statistics e.g., see Klein (1991); Clements and Hendry (1993); Wallis (1995); Newbold, Harvey, and Leybourne (1999); and Stock and Watson (1999). Resort to such an informal approach may be ascribed mainly to the complexities involved in dealing with sampling uncertainties and correlations that are present in forecast errors.

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