Detecting structural breaks in the economy can be challenging, but it is important for the purposes of forecasting, economists note in a new paper, published by the Bank of England. They go on to outline a new method of detecting when breaks may have occurred.
Jeremy Chiu, Simon Hayes, George Kapetanios and Konstantinos Theodoridis note there are existing methods of detecting when forecasts may have gone awry, but they can take a long time to identify breaks after they occur.
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