TY  - JOUR
AU  - Diebold,Francis X.
AU  - Kilian,Lutz
TI  - Measuring Predictability: Theory and Macroeconomic Applications
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 213
PY  - 1997
Y2  - August 1997
UR  - http://www.nber.org/papers/t0213
L1  - http://www.nber.org/papers/t0213.pdf
N1  - Author contact info:
Francis X. Diebold
Department of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA  19104-6297
Tel: 215/898-1507
Fax: 212/573-4217
E-Mail: fdiebold@sas.upenn.edu

Lutz Kilian
Dept.of Economics
University of Michigan
Ann Arbor,  MI 48109-1220
E-Mail: lkilian@umich.edu
AB  - We propose a measure of predictability based on the ratio of the expected loss of a short-run forecast to the expected loss of a long-run forecast.  This predictability measure can be tailored to the forecast horizons of interest, and it allows for general loss functions, univariate or multivariate information sets, and stationary or nonstationary data.  We propose a simple estimator, and we suggest resampling methods for inference.  We then provide several macroeconomic applications.  First, based on fitted parametric models, we assess the predictability of a variety of macroeconomic series.  Second, we analyze the internal propagation mechanism of a standard dynamic macroeconomic model by comparing predictability of model inputs and model outputs. Third, we use predictability as a metric for assessing the similarity of data simulated from the model and actual data. Finally, we sketch several promising directions for future research.
ER  -