Combining Forecasts Based on Multiple Encompassing Tests in a Macroeconomic Core System
Mauro Costantini and
Robert Kunst ()
No 243, Economics Series from Institute for Advanced Studies
We investigate whether and to what extent multiple encompassing tests may help determine weights for forecast averaging in a standard vector autoregressive setting. To this end we consider a new test-based procedure, which assigns non-zero weights to candidate models that add information not covered by other models. The potential benefits of this procedure are explored in extensive Monte Carlo simulations using realistic designs that are adapted to U.K. and to French macroeconomic data. The real economic growth rates of these two countries serve as the target series to be predicted. Generally, we find that the test-based averaging of forecasts yields a performance that is comparable to a simple uniform weighting of individual models. In one of our role-model economies, test-based averaging achieves some advantages in small samples. In larger samples, pure prediction models outperform forecast averages.
Keywords: Combining forecasts; encompassing tests; model selection; time series (search for similar items in EconPapers)
JEL-codes: C32 C53 (search for similar items in EconPapers)
Pages: 24 pages
New Economics Papers: this item is included in nep-cba, nep-ecm and nep-for
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://irihs.ihs.ac.at/id/eprint/1944 First version, 2009 (application/pdf)
Journal Article: Combining forecasts based on multiple encompassing tests in a macroeconomic core system (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ihs:ihsesp:243
Ordering information: This working paper can be ordered from
Institute for Advanced Studies - Library, Josefstädterstr. 39, A-1080 Vienna, Austria
Access Statistics for this paper
More papers in Economics Series from Institute for Advanced Studies Josefstädterstr. 39, A-1080 Vienna, Austria. Contact information at EDIRC.
Bibliographic data for series maintained by Doris Szoncsitz ().