TY  - JOUR
AU  - Stock,James H.
AU  - Watson,Mark W.
TI  - Evidence on Structural Instability in Macroeconomic Time Series Relations
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 164
PY  - 1994
Y2  - September 1994
UR  - http://www.nber.org/papers/t0164
L1  - http://www.nber.org/papers/t0164.pdf
N1  - Author contact info:
James H. Stock
Department of Economics
Harvard University
Littauer Center M27
Cambridge, MA 02138
Tel: 617/496-0502
Fax: 617/495-7730
E-Mail: James_Stock@harvard.edu

Mark W. Watson
Department of Economics
Princeton University
Princeton, NJ 08544-1013
Tel: 609/258-4811
Fax: 609/258-5533
E-Mail: mwatson@princeton.edu
AB  - An experiment is performed to assess the prevalence of instability in univariate and bivariate macroeconomic time series relations and to ascertain whether various adaptive forecasting techniques successfully handle any such instability.  Formal tests for instability and out-of-sample forecasts from sixteen different models are computed using a sample of 76 representative U.S. monthly postwar macroeconomic time series, constituting 5700 bivariate forecasting relations.  The tests indicate widespread instability in univariate and bivariate autoregressive models.  However, adaptive forecasting models, in particular time varying parameter models, have limited success in exploiting this instability to improve upon fixed-parameter or recursive autoregressive forecasts.
ER  -