Forecasting Contemporaneous Aggregates with Stochastic Aggregation Weights

Ralf Brueggemann and Helmut Luetkepohl
Authors registered in the RePEc Author Service: Ralf Brüggemann and Helmut Lütkepohl

No ECO2011/17, Economics Working Papers from European University Institute

Abstract: Many contemporaneously aggregated variables have stochasticaggregation weights. We compare different forecasts for such variables including univariate forecasts of the aggregate, a multivariate forecast of the aggregate that uses information from the disaggregate components, a forecast which aggregates a multivariate forecast of the disaggregate components and the aggregation weights, and a forecast which aggregates univariate forecasts for individual disaggregate components and the aggregation weights. In empirical illustrations based on aggregate GDP and money growth rates, we find forecast efficiency gains from using the information in the stochastic aggregation weights. A Monte Carlo study confirms that using the information on stochastic aggregation weights explicitly may result in forecast mean squared error reductions.

Keywords: Aggregation; autoregressive process; mean squared error (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
Date: 2011
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Related works:
Journal Article: Forecasting contemporaneous aggregates with stochastic aggregation weights (2013)
Working Paper: Forecasting Contemporaneous Aggregates with Stochastic Aggregation Weights (2011)
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