Abstract
A Stein-like shrinking methodology is proposed for modifying sets of metropolitan area economic forecasts. The technique is applied to historical published quarterly forecasts of the twenty metropolitan statistical areas of Florida. Stein-like shrinking is found to yield modest improvement in accuracy as evaluated by three alternative criteria, but the gains diminish with length of forecast horizon.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Anselin L (1988) Spatial Econometrics: Methods and Models. Kluwer Academic Publ, Dordrecht
Bates JM, Granger CWJ (1969) The combination of forecasts. Operations Research Quarterly 20:451–468
Bolton R (1980) Multiregional modeling in policy analysis. In: Adams FG, Glickman NJ (eds) Modeling the Multiregional Economic System. Heath, Lexington MA, pp 255–284
Bolton R (1982) The development of multiregional economic modeling in North America: multiregional models in transition for economies in transition. In: Issaev B, Nijkamp P, Rietveld P, Snickars F (eds) Multiregional Economic Modeling: Practice and Prospect. North-Holland, Amsterdam, pp 157–170
Bordignon S, Trivellato U (1989) The optimal use of provisional data in forecasting with dynamic models. J Business Econ Statist 7:275–286
Casella G (1985) An introduction to empirical Bayes data analysis. The American Statistician 39:83–87
Charney AH, Taylor CA (1983) Consistent region-subregion econometric models: a comparison of multiarea methods. Intern Reg Sci Rev 8:59–74
Charney AH, Taylor CA (1984) Decomposition of ex ante state model forecasting errors. J Reg Sci 24:229–247
Clemen RT, Winkler RL (1986) Combining economic forecasts. J Business Econ Statist 4:39–46
Dickinson JP (1975) Some statistical results on the combination of forecasts. Operations Research Quarterly 24:253–260
Diebold FX (1988) Serial correlation and the combination of forecasts. J Business Econ Statist 6:105–111
Diebold FX, Pauly P (1987) Structural change and the combination of forecasts. J Forecast 6:21–40
Efron B, Morris C (1972) Limiting the risk of Bayes and empirical Bayes estimates-Part II: The empirical Bayes case. J Am Statist Assoc 67:130–139
Efron B, Morris C (1973) Stein's estimation rule and its competitors — an empirical Bayes approach. J Am Statist Assoc 68:117–130
Efron B, Morris C (1975) Data analysis using Stein's estimator and its generalizations. J Am Statist Assoc 70:311–319
Fay RE, Herriot RA (1979) Estimates of income for small places: an application of James-Stein procedures to census data. J Am Statist Assoc 74:269–277
Granger CWJ, Newbold P (1974) Experience with forecasting univariate time series and the combination of forecasts. J Royal Statist Soc, Part 2, A 137:131–164
Granger CWJ, Ramanathan R (1984) Improved methods of combining forecasts. J Forecast 3:197–204
Harvey AC, McKenzie CR, Blake DPJ, Desai MJ (1983) Irregular data revisions. In: Zellner A (ed) Applied Time Series Analysis of Economic Data. US Department of Commerce, Bureau of the Census, Washington, DC, pp 329–339
Howrey EP (1978) The use of preliminary data in econometric forecasting. The Review of Economics and Statistics 60:193–200
James W, Stein C (1961) Estimation with quadratic loss. Proceedings of the Fourth Berkeley Symposium on Mathematical Statistics and Probability. University of California Press, Berkeley, CA, pp 361–379
Kang H (1986) Unstable weights in the combination of forecasts. Management Sci 32:683–695
Mahmoud E (1984) Accuracy in forecasting: A survey. J Forecast 3:139–159
McNees SK (1978) The ‘rationality’ of economic forecasts. Am Econ Rev 68:301–305
McNees SK (1988) How accurate are macroeconomic forecasts. New England Econ Rev July/August, pp 15–36
Nelson CR (1972) The prediction performance of the FRB-MIT-PENN model of the US economy. American Econ Rev 62:902–915
Richter C (1972) Some limitations of regional econometric models. Ann Reg Sci 6:28–34
Rietveld R (1982) A general overview of multiregional economic models. In: Issaev B, Nijkamp P, Rietveld P, Snickars F (eds) Multiregional Economic Modeling: Practice and Prospect. North-Holland, Amsterdam, pp 15–34
Shapiro HS, Fulton GA (1985) A Regional Econometric Forecasting System. The University of Michigan Press, Ann Arbor, MI
Snickars F (1982) Interregional linkages in multiregional economic models. In: Issaev B, Nijkamp P, Rietveld P, Snickars F (eds) Multiregional Economic Modeling: Practice and Prospect. North-Holland, Amsterdam, pp 49–64
Stein C (1956) Inadmissibility of the usual estimator for the mean of a multivariate normal distribution. Proceedings of the Third Berkeley Symposium on Mathematical Statistics and Probability. University of California Press, Berkeley, CA, pp 197–206
Taylor CA, Charney AH (1983) State-substate multiarea modeling: The case for nonrigid aggregation rules. Rev Publ Data Use 11:315–329
Taylor CA, Theil H (1988) Modeling the accuracy of certain regional predictions. Reg Sci Urb Econ 18:453–462
Theil H (1966) Applied Economic Forecasting. North-Holland, Amsterdam
Theil H (1967) Economics and Information Theory. North-Holland, Amsterdam
Zarnowitz V (1986) The record and improvability of economic forecasting. Economic Forecasts 3:22–30
Author information
Authors and Affiliations
Additional information
Research supported in part by the McKethan-Matherly Eminent Scholar Chair, University of Florida. The authors are indebted to Janet Galvez and Susan Narduzzi for their able research assistance and to two anonymous referees for their helpful comments.
Rights and permissions
About this article
Cite this article
Taylor West, C., Theil, H. An empirical analysis of stein effects in regional forecasts. Empirical Economics 16, 363–373 (1991). https://doi.org/10.1007/BF01206282
Received:
Revised:
Issue Date:
DOI: https://doi.org/10.1007/BF01206282