Direct Multi‐step Estimation and Forecasting

Abstract This paper surveys the literature on multi‐step forecasting when the model or the estimation method focuses directly on the link between the forecast origin and the horizon of interest. Among diverse contributions, we show how the current consensual concepts have emerged. We present an exhaustive overview of the existing results, including a conclusive review of the circumstances favourable to direct multi‐step forecasting, namely different forms of non‐stationarity and appropriate model design. We also provide a unifying framework which allows us to analyse the sources of forecast errors and hence of accuracy improvements from direct over iterated multi‐step forecasting.