From Fixed-Event to Fixed-Horizon Density Forecasts: Obtaining Measures of Multi-Horizon Uncertainty from Survey Density Forecasts

Gergely Ganics, Tatevik Sekhposyan and Barbara Rossi

No 1142, Working Papers from Barcelona School of Economics

Abstract: Surveys of professional forecasters produce precise and timely point forecasts for key macroeconomic variables. However, the accompanying density forecasts are not as widely utilized, and there is no consensus about their quality. This is partly because such surveys are often conducted for "fixed events". For example, in each quarter panelists are asked to forecast output growth and inflation for the current calendar year and the next, implying that the forecast horizon changes with each survey round. The fixed-event nature limits the usefulness of survey density predictions for policymakers and market participants, who often wish to characterize uncertainty a fixed number of periods ahead ("fixed-horizon"). Is it possible to obtain fixed-horizon density forecasts using the available fixed-event ones? We propose a density combination approach that weights fixed-event density forecasts according to a uniformity of the probability integral transform criterion, aiming at obtaining a correctly calibrated fixed-horizon density forecast. Using data from the US Survey of Professional Forecasters, we show that our combination method produces competitive density forecasts relative to widely used alternatives based on historical forecast errors or Bayesian VARs. Thus, our proposed fixed-horizon predictive densities are a new and useful tool for researchers and policy makers.

Keywords: uncertainty; survey of professional forecasters; predictive density; probability integral transform; density forecasts; forecast combination; real-time (search for similar items in EconPapers)
JEL-codes: C13 C32 C53 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-for and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: From Fixed‐Event to Fixed‐Horizon Density Forecasts: Obtaining Measures of Multihorizon Uncertainty from Survey Density Forecasts (2024)
Working Paper: From fixed-event to fixed-horizon density forecasts: obtaining measures of multi-horizon uncertainty from survey density forecasts (2019)
Working Paper: From fixed-event to fixed-horizon density forecasts: Obtaining measures of multi-horizon uncertainty from survey density forecasts (2019)
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