Forecasting Using Predictive Likelihood Model Averaging

George Kapetanios, Vincent Labhard (vincent.labhard@ecb.europa.eu) and Simon Price

No 567, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: Recently, there has been increasing interest in forecasting methods that utilise large datasets. We explore the possibility of forecasting with model averaging using the out-of-sample forecasting performance of various models in a frequentist setting, using the predictive likelihood. We apply our method to forecasting UK inflation and find that the new method performs well; in some respects it outperforms other averaging methods.

Keywords: Forecasting; Inflation; Bayesian model averaging; Akaike criterion; Forecast combining (search for similar items in EconPapers)
JEL-codes: C11 C15 C53 (search for similar items in EconPapers)
Date: 2006-09-01
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Citations: View citations in EconPapers (31)

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