Économie et statistiques N° 99/2018 An evaluation of the short-term forecasting properties of Modux

The recent financial crisis has highlighted the difficulty of making reliable forecasts of economic and financial variables. Forecast errors are unavoidable since economic indicators are random variables. However, part of the errors are due to incorrectly specified models and/or assumptions. Hence, it is important to evaluate the properties of a given set of forecasts, trying to understand how reliable they are and to what extent they can be improved.

In this report we present an evaluation of the forecasts produced by Modux, a yearly macroeconometric model for Luxembourg including about 500 variables, with about 100 econometric equations for the key economic indicators, developed by Statec.