Handbook of Economic Forecasting - 1st Edition - ISBN: 9780444536839, 9780444536846

Handbook of Economic Forecasting, Volume 2A

1st Edition

Editors: Graham Elliott Allan Timmermann
Hardcover ISBN: 9780444536839
eBook ISBN: 9780444536846
Imprint: North Holland
Published Date: 15th July 2013
Page Count: 720
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Table of Contents


Introduction to the Series


Section I: Macro Forecasting

Chapter 1. Forecasting Inflation


1 Introduction

2 Approach for Our General Review

3 Market-Based Measures of the Inflation Outlook

4 Other Topics

5 International Inflation Forecasts

6 Conclusions



Chapter 2. DSGE Model-Based Forecasting


1 Introduction

2 The DSGE Models

3 Generating Forecasts with DSGE Models

4 Accuracy of Point Forecasts

5 DSGE Model Forecasts Using External Information

6 Forecasts Conditional on Interest Rate Paths

7 Moving Beyond Point Forecasts

8 Outlook


Appendix A Details for Figure 2.5


Chapter 3. Forecasting Output


1 Introduction

2 Forecasting Models

3 Forecast Comparison: Real-time Performance

4 Conclusion



Chapter 4. Now-Casting and the Real-Time Data Flow


1 Introduction

2 Now-Casting: Problem and Overview of Approaches

3 Empirical Application

4 Conclusions and Discussion on Further Developments


Appendix A Appendix: Details on the State Space Representation and Estimation


Chapter 5. Forecasting and Policy Making


1 Introduction

2 The Role of Forecasts in Policy Making: A Practical Example and a Theoretical Framework

3 Examples of Forecasts Produced at Fiscal Authorities and Central Banks

4 Empirical Evidence that Policymakers’ Decisions Respond to Forecasts

5 Computing Forecasts that Account for the Interaction with Policy Decisions

6 Evaluating the Performance of Policy Rules that Respond to Forecasts

7 Outlook


Appendix A A medium-scale DSGE model


Section II: Forecasting Financial Variables

Chapter 6. Forecasting Stock Returns


1 Introduction

2 What Level of Predictability Should We Expect?

3 U.S. Aggregate Stock Market Return Forecastability

4 Stock Return Forecastability Along Other Dimensions

5 Conclusion



Chapter 7. Forecasting Interest Rates


1 Introduction

2 Forecasting Methods from a Finance Perspective

3 Regression Approaches to Forecasting Treasury Yields

4 A Dynamic Term Structure Framework

5 Macro-Finance Models

6 Economic Fundamentals and Risk Premia

7 A Robustness Check

8 Concluding Comments



Chapter 8. Forecasting the Price of Oil


1 Introduction

2 Alternative Oil Price Measures

3 Alternative Oil Price Specifications

4 Granger Causality Tests

5 Short-Horizon Forecasts of the Nominal Price of Oil

6 Long-Horizon Forecasts of the Nominal Price of Oil Based on Oil Futures Prices

7 Survey Forecasts of the Nominal Price of Oil

8 What Have We Learned about Forecasting the Nominal Price of Oil?

9 Short-Horizon Forecasts of the Real Price of Oil

10 What Have We Learned about Forecasting the Real Price of Oil?

11 Structural VAR Forecasts of the Real Price of Oil

12 The Ability of Oil Prices to Forecast U.S. Real GDP

13 The Role of Oil Price Volatility

14 Avenues for Future Research

15 Conclusions



Chapter 9. Forecasting Real Estate Prices


1 Introduction

2 The Real Estate Data

3 Forecasting Real Estate Returns


5 Real Estate, Leverage, and Monetary Policy

6 Concluding Remarks

Appendix A Data sources


Chapter 10. Forecasting with Option-Implied Information


1 Introduction

2 Extracting Volatility and Correlation from Option Prices

3 Extracting Skewness and Kurtosis from Option Prices

4 Extracting Densities from Option Prices

5 Allowing for Risk Premia

6 Summary and Discussion



Chapter 11. Prediction Markets for Economic Forecasting


1 Introduction

2 Types of Prediction Markets

3 Why Prediction Markets Work

4 Forecast Accuracy

5 Discovering Economic Models

6 Conclusion





The highly prized ability to make financial plans with some certainty about the future comes from the core fields of economics.  In recent years the availability of more data, analytical tools of greater precision, and ex post studies of business decisions have increased demand for information about economic forecasting. Volumes 2A and 2B, which follows Nobel laureate Clive Granger's Volume 1 (2006), concentrate on two major subjects.  Volume 2A covers innovations in methodologies, specifically macroforecasting and forecasting financial variables.  Volume 2B investigates commercial applications, with sections on forecasters' objectives and methodologies.  Experts provide surveys of a large range of literature scattered across applied and theoretical statistics journals as well as econometrics and empirical economics journals.  The Handbook of Economic Forecasting Volumes 2A and 2B provide a unique compilation of chapters giving a coherent overview of forecasting theory and applications in one place and with up-to-date accounts of all major conceptual issues.

Key Features

  • Focuses on innovation in economic forecasting via industry applications
  • Presents coherent summaries of subjects in economic forecasting that stretch from methodologies to applications
  • Makes details about economic forecasting accessible to scholars in fields outside economics


Graduate students and professors worldwide working in all subdisciplines of economics and finance


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"…the eleven papers in this collection survey recent literature on forecasting stock returns, interest rates, the price of oil, real estate prices, inflation, national output, business cycles, and the GDP impact of a fiscal stimulus package...The contributors agree most economic models  failed to predict the Great Recession."--ProtoView.com, April 2014

"Forecasting is one of the most challenging and competitive activities undertaken by economists. Volume 2 of the Handbook of Economic Forecasting and the companion Volume 1 are essential references for keeping abreast of recent improvements in forecasting methodology and its application in demanding circumstances."--John Geweke, University of Technology Sydney, Australia

"This is a highly recommended volume on forecasting that covers a wide-range of applications in economic and financial forecasting, as well as providing comprehensive and up-to-date overviews of forecasting theory by the leading scholars in the field."--Hashem Pesaran, University of Southern California

"An excellent resource for any economist interested in forecasting."--Kenneth D. West, University of Wisconsin

"These articles have been written by the most important players in the areas, by the people who have provided important contributions to their fields.  I have no doubt about the very high quality of these chapters and the impact they will have on people doing applied work."--Valentina Corradi, University of Warwick

About the Editors

Graham Elliott Editor

Co-Editor of the International Journal of Forecasting, Graham Elliott is a Fellow at the Center for Applied Macroeconomic Analysis.

Affiliations and Expertise

University of California, San Diego, USA

Allan Timmermann Editor

Allan Timmerman has served as an associate editor on the editorial boards of forecasting, economics, and finance journals. A member of the UCSD faculty since 1994, he obtained his Ph.D. from Cambridge University.

Affiliations and Expertise

Rady School of Management, University of California, San Diego, USA