Kenneth F. Wallis has held the Chair of Econometrics at the University of Warwick since 1977; before this he was for eleven years on the staff of the London School of Economics. He is Director of the ESRC Macroeconomic Modelling Bureau, established by the Economic and Social Research Council at the University of Warwick in 1983.
Forecasting with an econometric model: The ‘ragged edge’ problem†
Article first published online: 27 DEC 2006
Copyright © 1986 John Wiley & Sons, Ltd.
Journal of Forecasting
Volume 5, Issue 1, pages 1–13, January 1986
How to Cite
Wallis, K. F. (1986), Forecasting with an econometric model: The ‘ragged edge’ problem. J. Forecast., 5: 1–13. doi: 10.1002/for.3980050102
This paper is a revised version of ESRC Macroeconomic Modelling Bureau Discussion Paper No. 5 (March 1985), which was written during a visit to the Department of Economics, Research School of Social Sciences, Australian National University, whose kind hospitality is gratefully acknowledged. After the paper was provisionally accepted for publication, the work of Sandee et al. (1984) came to my attention: Their treatment of the problem is commented on in the final section of the paper.
- Issue published online: 27 DEC 2006
- Article first published online: 27 DEC 2006
- Manuscript Revised: DEC 1985
- Manuscript Received: MAY 1985
- Macroeconomic models;
In practical econometric forecasting exercises, incomplete data on current and immediate past values of endogenous variables are available. This paper considers various approaches to this ‘ragged edge’ problem, including the common device of treating as ‘temporarily exogenous’ an endogenous variable whose value is known, by deleting it from the set of endogenous variables for whose forecast values the model is solved and suppressing the corresponding structural equation. It is seen that this forecast can be adjusted to coincide with the optimal forecast. The initial discussion concerns the textbook linear simultaneous equation model; extensions to non-linear dynamic models are described.