Density forecast combinations: The real‐time dimension

Peter McAdam () and Anders Warne

Journal of Forecasting, 2024, vol. 43, issue 5, 1153-1172

Abstract: Euro area real‐time density forecasts from three dynamic stochastic general equilibrium (DSGE) and three Bayesian vector autoregression (BVAR) models are compared with six combination methods over the sample 2001Q1–2019Q4. The terms information and observation lag are introduced to distinguish time shifts between data vintages and actuals used to compute model weights and compare the forecast, respectively. Bounds for finite mixture combinations are presented, allowing for benchmarking them given the models. Empirically, combinations with limited weight variation often improve upon the individual models for the output and the joint forecasts with inflation. This reflects overconfident BVAR forecasts before the Great Recession. For inflation, a BVAR model typically performs best.

Date: 2024
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https://doi.org/10.1002/for.3068

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Working Paper: Density forecast combinations: the real-time dimension (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jforec:v:43:y:2024:i:5:p:1153-1172

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