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"Analyzing Macroeconomic Forecastability",
Journal of Forecasting, 31 (2012), 99-108.
pdf file.
Abstract
This paper estimates, using stochastic simulation and a multicountry
macroeconometric model, the fraction of the forecast-error
variance of output changes
and the fraction of the forecast-error variance of inflation that are due to
unpredictable asset-price changes.
The results suggest that between about 25 and 37 percent
of the forecast-error variance of output
growth over 8 quarters is due to asset-price changes and between about
33 and 60 percent of the forecast-error
variance of inflation over 8 quarters is due to asset-price changes.
These estimates provide limits to the accuracy that can be expected
from macroeconomic forecasting.
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