 Predicting economic contractions and expansions with the aid of professional forecastsChew Chua and Sarantis Tsiaplias International Journal of Forecasting, 2011, vol. 27, issue 2, 438-451 Abstract: Traditional econometric models of economic contractions typically perform poorly in forecasting exercises. This criticism is also frequently levelled at professional forecast probabilities of contractions. This paper addresses the problem of incorporating the entire distribution of professional forecasts into an econometric model for forecasting contractions and expansions. A new augmented probit approach is proposed, involving the transformation of the distribution of professional forecasts into a ‘professional forecast’ prior for the economic data underlying the probit model. Since the object of interest is the relationship between the distribution of professional forecasts and the probit model’s economic-data dependent parameters, the solution avoids criticisms levelled at the accuracy of professional forecast based point estimates of contractions. An application to US real GDP data shows that the model yields significant forecast improvements relative to alternative approaches. Keywords: Forecast performance; Probit model; Bayesian analysis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:27:y:2011:i:2:p:438-451 DOI: 10.1016/j.ijforecast.2010.01.010 Access Statistics for this article International Journal of Forecasting is currently edited by R. J. Hyndman More articles in International Journal of Forecasting from Elsevier |
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