Combining multivariate density forecasts using predictive criteria

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Gerard, Hugo; Nimark, Kristoffer. Combining multivariate density forecasts using predictive criteria. 2008
To cite or link this document: Gerard, Hugo Nimark, Kristoffer
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa 2008-08-01
dc.description.abstract This paper combines multivariate density forecasts of output growth, inflation and interest rates from a suite of models. An out-of-sample weighting scheme based on the predictive likelihood as proposed by Eklund and Karlsson (2005) and Andersson and Karlsson (2007) is used to combine the models. Three classes of models are considered: a Bayesian vector autoregression (BVAR), a factor-augmented vector autoregression (FAVAR) and a medium-scale dynamic stochastic general equilibrium (DSGE) model. Using Australian data, we find that, at short forecast horizons, the Bayesian VAR model is assigned the most weight, while at intermediate and longer horizons the factor model is preferred. The DSGE model is assigned little weight at all horizons, a result that can be attributed to the DSGE model producing density forecasts that are very wide when compared with the actual distribution of observations. While a density forecast evaluation exercise reveals little formal evidence that the optimally combined densities are superior to those from the best-performing individual model, or a simple equal-weighting scheme, this may be a result of the short sample available.
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 1117
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.title Combining multivariate density forecasts using predictive criteria
dc.type info:eu-repo/semantics/workingPaper 2014-06-03T07:14:23Z
dc.subject.keyword Macroeconomics and International Economics
dc.subject.keyword density forecasts
dc.subject.keyword combining forecasts
dc.subject.keyword predictive criteria
dc.rights.accessRights info:eu-repo/semantics/openAccess

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