Equal Predictive Ability Tests Based on Panel Data with Applications to OECD and IMF Forecasts

2020/03/05 by Oğuzhan Akgün, Akgun, Oguzhan, Alain Pirotte +5 · 1 citation
Economics, Econometrics and Finance · #Econometrics (econ.EM) #Economic Growth and Productivity #FOS: Economics and business #Monetary Policy and Economic Impact #Spatial and Panel Data Analysis

paper · pdf · doi:10.48550/arxiv.2003.02803

openalex publication_date 2020/03/05 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

We propose two types of equal predictive ability (EPA) tests with panels to compare the predictions made by two forecasters. The first type, namely S-statistics, focuses on the overall EPA hypothesis which states that the EPA holds on average over all panel units and over time. The second, called C-statistics, focuses on the clustered EPA hypothesis where the EPA holds jointly for a fixed number of clusters of panel units. The asymptotic properties of the proposed tests are evaluated under weak and strong cross-sectional dependence. An extensive Monte Carlo simulation shows that the proposed tests have very good finite sample properties even with little information about the cross-sectional dependence in the data. The proposed framework is applied to compare the economic growth forecasts of the OECD and the IMF, and to evaluate the performance of the consumer price inflation forecasts of the IMF.

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