The results of the ECM forecasts were compared to a naive model
Since no comparison data were available for the majority of publication series, BLS projections also are weighed against the performance of a naive model
In all instances, the RMSE ratios are greater than or nearly indistinguishable from 1 and, hence, the naive model
outpredicts the factor models.
Table 2 section (c) summarizes the naive model
results for PDC among users.
Note that the naive model
had an accuracy of nearly 27 percent, far less than other models.
In the naive model
, the GDP growth forecast is recursively set equal to the average GDP growth rate over the past five years.
A Naive model
forecast maintains that the best forecast for the next day's or the next week's price is simply today's or this week's price.
To put this in perspective this model was compared with a naive model
based solely on the prior year's production.
It is also noted that the naive model
produces "backward looking" forecasts, since it utilizes the information in the past history of the actual T-bill rate, [R.
Our notion of robustness is that the model consistently lies near the top of performance lists of alternative models and is consistently more successful than models based only on past inflation, such as Atkeson and Ohanian's naive model
In particular, Atkeson and Ohanian (2001) present evidence indicating that one-year-ahead inflation forecasts from several NAIRU (nonaccelerating-inflation rate of unemployment) Phillips curves are no more accurate than those from a naive model
that predicts inflation next year will be the same as it had been over the past year.