A new test for non-linearity in the conditional mean is proposed using functions of the principal components of regressors.  The test extends the non-linearity tests based on Kolmogorov-Gavor polynomials (Thursby and Schmidt, 1977, Tsay, 1986, and Terasvirta, Lin and Granger, 1993), but...

Even in scientific disciplines, forecast failures occur.  Four possible states of nature (a model is good or bad, and it forecasts well or badly) are examined using a forecast-error taxonomy, which traces the many possible sources of forecast errors.  This analysis shows that a valid model can...

Structural models` inflation forecasts are often inferior to those of naive devices. This chapter theoretically and empirically assesses this for UK annual and quarterly inflation, using the theoretical framework in Clements and Hendry (1998, 1999). Forecasts from equilibrium-correction...