We propose a theoretical framework for assessing whether a forecast model estimated over one period can provide good forecasts over a subsequent period. We formalize this idea by defining a forecast breakdown as a situation in which the out-of-sample performance of the model, judged by some loss...

We propose a theoretical framework for assessing whether a forecast model estimated over one period can provide good forecasts over a subsequent period. We formalize this idea by defining a forecast breakdown as a situation in which the out-of-sample performance of the model, judged by some loss...

We propose a new Information Criterion for Impulse Response Function Matching estimators of the structural parameters of macroeconomic models. The main advantage of our procedure is that it allows the researcher to select the impulse responses that are most informative about the deep parameters,...

This paper proposes forecast optimality tests that can be used in unstable environments. They include tests for forecast unbiasedness, efficiency, encompassing, serial uncorrelation, and, in general, regression-based tests of forecasting ability. The proposed tests are applied to evaluate the...

We provide an extensive evaluation of the predictive performance of the U.S. yield curve for U.S. GDP growth by using a new test for forecast breakdown as well as a variety of in-sample and out-of-sample testing procedures. Empirical research over the past decades uncovered a strong predictive...

This paper studies the dynamic relationship between exchange rate fluctuations and world commodity price movements. Taking into account parameter instability, we demonstrate surprisingly robust evidence that exchange rates predict world commodity price movements, both in-sample and...

We propose new methods for comparing the relative out-of-sample forecasting performance of two competing models in the presence of possible instabilities. The main idea is to develop a measure of the relative ìlocal forecasting performanceî for the two models, and to investigate its stability...

We propose new information criteria for impulse response function matching estimators (IRFMEs). These estimators yield sampling distributions of the structural parameters of dynamic stochastic general equilibrium (DSGE) models by minimizing the distance between sample and theoretical impulse...

This paper demonstrates that "commodity currency" exchange rates have remarkably robust power in predicting future global commodity prices, both in sample and out-of-sample. A critical element of our in-sample approach is to allow for structural breaks, endemic to empirical exchange rate models,...