Structural changes are quite common in macroeconomic time series. Moreover, any underlying macroeconomic relationship cannot be correctly specified unless we know the true model. Structural changes in time series and misspecification in empirical model are observed as shifts in the constant of...

We investigate forecasting in models that condition on variables for which future values are unknown. We consider the role of the significance level because it guides the binary decisions whether to include or exclude variables. The analysis is extended by allowing for a structural break, either...