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Title:Forecasting economic variables with nonlinear models PDF Logo
Authors:Teräsvirta, Timo
Issue Date:2005
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 598
Abstract:This article is concerned with forecasting from nonlinear conditional mean models. First, a number of often applied nonlinear conditional mean models are introduced and their main properties discussed. The next section is devoted to techniques of building nonlinear models. Ways of computing multi-step ahead forecasts from nonlinear models are surveyed. Tests of forecast accuracy in the case where the models generating the forecasts are nested are discussed. There is a numerical example, showing that even when a stationary nonlinear process generates the observations, future obervations may in some situations be better forecast by a linear model with a unit root. Finally, some empirical studies that compare forecasts from linear and nonlinear models are discussed.
Subjects:Forecast accuracy
forecast comparison
hidden Markov model
neural network
nonlinear modelling
recursive forecast
smooth transition regression
switching regression
JEL:C22
C45
C53
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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