Forecast combinations in a DSGE-VAR lab

Costantini, Mauro and Gunter, Ulrich and Kunst, Robert M. (December 2014) Forecast combinations in a DSGE-VAR lab. IHS Economics Series 309, 57 p.

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Abstract or Table of Contents

We explore the benefits of forecast combinations based on forecast-encompassing tests compared to simple averages and to Bates-Granger combinations. We also consider a new combination method that fuses test-based and Bates-Granger weighting. For a realistic simulation design, we generate multivariate time-series samples from a macroeconomic DSGE-VAR model. Results generally support Bates-Granger over uniform weighting, whereas benefits of test-based weights depend on the sample size and on the prediction horizon. In a corresponding application to real-world data, simple averaging performs best. Uniform averages may be the weighting scheme that is most robust to empirically observed irregularities.

Item Type: IHS Series
Keywords: Combining forecasts, encompassing tests, model selection, time series, DSGE-VAR model
Status: Published
Date Deposited: 03 Feb 2015 08:17
Last Modified: 24 Jul 2017 18:24
URI: http://irihs.ihs.ac.at/id/eprint/2911

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