Forecast accuracy and effort: the case of US inflation rates

Taylor, Nick James 2011. Forecast accuracy and effort: the case of US inflation rates. Journal of Forecasting 30 (7) , pp. 644-665. 10.1002/for.1199

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Abstract

This paper investigates the relationship between forecast accuracy and effort, where effort is defined as the number of times the model used to generate forecasts is recursively estimated over the full sample period. More specifically, within a framework of costly effort, optimal effort strategies are derived under the assumption that the dynamics of the variable of interest follow an autoregressive-type process. Results indicate that the strategies are fairly robust over a wide range of linear and nonlinear processes (including structural break processes), and deliver forecasts of transitory, core and total inflation that require less effort to generate and are as accurate as (that is, are insignificantly different from) those produced with maximum effort.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	E History America > E11 America (General) H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce H Social Sciences > HG Finance H Social Sciences > HJ Public Finance J Political Science > JK Political institutions (United States)
Uncontrolled Keywords:	Forecast updating ; Effort ; Inflation
Publisher:	Wiley Blackwell
ISSN:	0277-6693
Last Modified:	25 Jun 2017 02:43
URI:	https://orca.cardiff.ac.uk/id/eprint/18412

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