Forecast densities for economic aggregates from disaggregate ensembles

Francesco Ravazzolo and Shaun Vahey

Studies in Nonlinear Dynamics & Econometrics, 2014, vol. 18, issue 4, 367-381

Abstract: We extend the “bottom up” approach for forecasting economic aggregates with disaggregates to probability forecasting. Our methodology utilises a linear opinion pool to combine the forecast densities from many disaggregate forecasting specifications, using weights based on the continuous ranked probability score. We also adopt a post-processing step prior to forecast combination. These methods are adapted from the meteorology literature. In our application, we use our approach to forecast US Personal Consumption Expenditure inflation from 1990q1 to 2009q4. Our ensemble combining the evidence from 16 disaggregate PCE series outperforms an integrated moving average specification for aggregate inflation in terms of density forecasting.

Keywords: density combinations; disaggregates; ensemble forecasting (search for similar items in EconPapers)
JEL-codes: C11 C32 C53 E37 E52 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (44)

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Related works:
Working Paper: Forecast densities for economic aggregates from disaggregate ensembles (2010)
Working Paper: Forecast Densities for Economic Aggregates from Disaggregate Ensembles (2010)
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DOI: 10.1515/snde-2012-0088

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