Abstract
The paper considers two types of models for forecasting seasonally adjusted Russian GDP under the structural breaks. Models that allow breaks in a deterministic trend, in which the dates of structural breaks are set exogenously, and more flexible class of models – with a stochastic trend are considered. It is shown that modeling a structural break in a deterministic trend or adding a stochastic trend significantly improves the quality of 3–4 steps ahead forecasts, and sometimes even on shorter horizons, compared to models with a constant trend growth rate.
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