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Comparison of simple sum and Divisia monetary aggregates in GDP forecasting: a support vector machines approach

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  • Periklis Gogas

    ()
    (Democritus University of Thrace)

  • Theophilos Papadimitriou

    ()
    (Democritus University of Thrace)

  • Elvira Takli

    ()
    (Democritus University of Thrace)

Abstract

In this study we compare the forecasting ability of the simple sum and Divisia monetary aggregates with respect to U.S. gross domestic product. We use two alternative Divisia aggregates, the series produced by the Center for Financial Stability (CFS Divisia) and the ones produced by the Federal Reserve Bank of St. Louis (MSI Divisia). The empirical analysis is done within a machine learning framework employing a Support Vector Regression (SVR) model equipped with two kernels: the linear and the radial basis function kernel. Our training data span the period from 1967Q1 to 2007Q4 and the out-of-sample forecasts are performed on a one quarter ahead forecasting horizon on the period 2008Q1 to 2011Q4. Our tests show that the Divisia monetary aggregates are superior to the simple sum monetary aggregates in terms of standard forecast evaluation statistics.

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File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I2-P104.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 33 (2013)
Issue (Month): 2 ()
Pages: 1101-1115

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Handle: RePEc:ebl:ecbull:eb-13-00134

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Keywords: GDP forecasting; SVR; Simple Sum; Divisia;

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  1. Michael T. Belongia & Peter N. Ireland, 2010. "The Barnett Critique After Three Decades: A New Keynesian Analysis," Boston College Working Papers in Economics 736, Boston College Department of Economics.
  2. Pesaran, M.H. & Schuermann, T. & Smit, L.V., 2008. "Forecasting Economic and Financial Variables with Global VARs," Cambridge Working Papers in Economics 0807, Faculty of Economics, University of Cambridge.
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  17. Wolden Bache, Ida & Sofie Jore, Anne & Mitchell, James & Vahey, Shaun P., 2011. "Combining VAR and DSGE forecast densities," Journal of Economic Dynamics and Control, Elsevier, vol. 35(10), pages 1659-1670, October.
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Cited by:
  1. Ioannis Praggidis & Periklis Gogas & Vasilios Plakandaras & Theophilos Papadimitriou, 2013. "Fiscal shocks and asymmetric effects: a comparative analysis," Papers 1312.2693, arXiv.org.
  2. Plakandaras, Vasilios & Gupta, Rangan & Papadimitriou, Theophilos & Gogas, Periklis, 2014. "Forecasting the U.S. Real House Price Index," DUTH Research Papers in Economics 10-2014, Democritus University of Thrace, Department of Economics.

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