History is littered with forecasts that went badly wrong, a fact sharply illustrated during the recent financial crash and recession. This Oxford Martin policy paper from Professor Sir David Hendry and Dr Felix Pretis examines a fundamental problem in economic forecasting: that many models used in empirical research and for guiding policy have been based on treating observed data, such as unemployment or income levels, as timeless, or ‘stationary’.
Hendry, David F. and Felix Pretis (2016). `All change! The implications of non-stationarity for empirical modelling, forecasting, and policy’. Oxford Martin School Policy Paper.