Model Switching and Model Averaging in Time-Varying Parameter Regression Models

Miguel Belmonte and Gary Koop

A chapter in Bayesian Model Comparison, 2014, vol. 34, pp 45-69 from Emerald Group Publishing Limited

Abstract: This paper investigates the usefulness of switching Gaussian state space models as a tool for implementing dynamic model selection (DMS) or averaging (DMA) in time-varying parameter regression models. DMS methods allow for model switching, where a different model can be chosen at each point in time. Thus, they allow for the explanatory variables in the time-varying parameter regression model to change over time. DMA will carry out model averaging in a time-varying manner. We compare our exact method for implementing DMA/DMS to a popular existing procedure which relies on the use of forgetting factor approximations. In an application, we use DMS to select different predictors in an inflation forecasting application. We find strong evidence of model switching. We also compare different ways of implementing DMA/DMS and find forgetting factor approaches and approaches based on the switching Gaussian state space model to lead to similar results.

Keywords: Model switching; forecast combination; switching state space model; inflation forecasting; C11; C52; E37 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... 1-905320140000034004
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)

Related works:
Working Paper: Model Switching and Model Averaging in Time- Varying Parameter Regression Models (2013)
Working Paper: Model Switching and Model Averaging in Time-Varying Parameter Regression Models (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:aecozz:s0731-905320140000034004

DOI: 10.1108/S0731-905320140000034004

Access Statistics for this chapter

More chapters in Advances in Econometrics from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().