Time-varying mixed frequency forecasting: A real-time experiment

Stefan Neuwirth ()
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Stefan Neuwirth: KOF Swiss Economic Institute, ETH Zurich, Switzerland

No 17-430, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich

Abstract: This paper tests the usefulness of time-varying parameters when forecasting with mixed-frequency data. For this we compare the forecast performance of bridge equations and unrestriced MIDAS models with constant and time-varying parameters. An out-of-sample forecasting exercise with US real-time data shows that the use of time-varying parameters does not improve forecasts significantly over all vintages. However, since the Great Recession, forecast errors are smaller when forecasting with bridge equations due to the ability of time-varying parameters to incorporate gradual structural changes faster.

Pages: 35 pages
Date: 2017-06
New Economics Papers: this item is included in nep-ets, nep-for and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:kof:wpskof:17-430

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