Forecasting Australian Macroeconomic Variables Using a Large Dataset

Sarantis Tsiaplias and Chew Chua

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: This paper investigates the forecasting performance of the diffusion index approach for the Australian economy, and considers the forecasting performance of the diffusion index approach relative to composite forecasts. Weighted and unweighted factor forecasts are benchmarked against composite forecasts, and forecasts derived from individual forecasting models. The results suggest that diffusion index forecasts tend to improve on the benchmark AR forecasts. We also observe that weighted factors tend to produce better forecasts than their unweighted counterparts. We find, however, that the size of the forecasting improvement is less marked than previous research, with the diffusion index forecasts typically producing mean square errors of a similar magnitude to the VAR and BVAR approaches. JEL Classification: C22; C53; E17

Keywords: PDiffusion indexes; Forecasting; Australia. (search for similar items in EconPapers)
Pages: 25 pages
Date: 2008-02
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-ets and nep-for
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Related works:
Journal Article: FORECASTING AUSTRALIAN MACROECONOMIC VARIABLES USING A LARGE DATASET (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2008n04

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