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Real-Time Density Nowcasts of US Inflation: A Model-Combination Approach

Edward Knotek () and Saeed Zaman

No 202031, Working Papers from Federal Reserve Bank of Cleveland

Abstract: We develop a flexible modeling framework to produce density nowcasts for US inflation at a trading-day frequency. Our framework: (1) combines individual density nowcasts from three classes of parsimonious mixed-frequency models; (2) adopts a novel flexible treatment in the use of the aggregation function; and (3) permits dynamic model averaging via the use of weights that are updated based on learning from past performance. Together these features provide density nowcasts that can accommodate non-Gaussian properties. We document the competitive properties of the nowcasts generated from our framework using high-frequency real-time data over the period 2000-2015.

Keywords: mixed-frequency models; inflation; density nowcasts; density combinations (search for similar items in EconPapers)
JEL-codes: C15 C53 E3 E37 (search for similar items in EconPapers)
Pages: 49
Date: 2020-10-22
New Economics Papers: this item is included in nep-ecm and nep-ets
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DOI: 10.26509/frbc-wp-202031

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