New method detects economic forecast failures before they impact markets.
The article introduces a new method to determine if a forecast model remains accurate over time. It can be used for predicting economic and financial trends. By analyzing the continuous changes in forecast accuracy, the researchers developed a test that can detect when a forecast starts to fail. This test is powerful and can identify issues even in unstable or changing conditions. The new method outperforms existing techniques, especially when the forecast failure is brief or happens towards the end of the data.