This paper provides an introduction to predictable forecast uncertainty in empirical economic modelling. The sources of both predictable and unpredictable forecast uncertainty are categorized. Key features of predictable forecast uncertainty are illustrated by several analytical models,...

This paper provides an introduction to forecast uncertainty in empirical economic modeling. Forecast uncertainty is defined, various measures of forecast uncertainty are examined, and some sources and consequences of forecast uncertainty are analyzed. Empirical illustrations with the U.S. trade...

Both future disturbances and estimated coefficients contribute to the uncertainty in model-based ex ante forecasts, but only the first source is usually taken into account when calculating confidence intervals for practical applications. Schmidt (1974) and Baillie (1979) provide an easily...

This paper evaluates the distributional properties of forecasts from six econometric models of the U.S. trade account. Using stochastic (Monte Carlo) simulation, we derive confidence intervals and forecast-based test statistics which account for uncertainty from future disturbances and from...

This paper examines the evaluation of models claimed to be relevant for policy making purposes. A number of tests are proposed to determine the usefulness of such models in the policy making process. These tests are applied to three empirical examples.

This paper implements recursive techniques to estimate the equilibrium level of M2 velocity and to forecast inflation using the P* model. The recursive estimates of equilibrium velocity are obtained by applying regression trees and least squares methods to a standard representation of M2 demand,...