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A Bayesian method of combining judgmental and model-based density forecasts

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Author Info

  • Kocięcki, Andrzej
  • Kolasa, Marcin
  • Rubaszek, Michał

Abstract

This paper introduces a formal method of combining expert and model density forecasts when the sample of past forecasts is unavailable. It works directly with the expert forecast density and endogenously delivers weights for forecast combination, relying on probability rules only. The empirical part of the paper illustrates how the framework can be applied in forecasting US inflation by mixing density forecasts from an autoregressive model and the Survey of Professional Forecasters.

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File URL: http://www.sciencedirect.com/science/article/pii/S0264999312000600
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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 4 ()
Pages: 1349-1355

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:4:p:1349-1355

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Combining density forecasts; Forecast evaluation; Bayesian inference; Predictivism;

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References

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  1. Croushore, Dean & Stark, Tom, 2001. "A real-time data set for macroeconomists," Journal of Econometrics, Elsevier, vol. 105(1), pages 111-130, November.
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  3. Todd E. Clark & Michael W. McCracken, 2007. "Tests of equal predictive ability with real-time data," Research Working Paper RWP 07-06, Federal Reserve Bank of Kansas City.
  4. Elliott, Graham & Timmermann, Allan, 2004. "Optimal forecast combinations under general loss functions and forecast error distributions," Journal of Econometrics, Elsevier, vol. 122(1), pages 47-79, September.
  5. Anne-Sofie Jore & James Mitchell & Shaun P. Vahey, 2008. "Combining forecast densities from VARs with uncertain instabilities," Working Paper 2008/01, Norges Bank.
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  8. Giordani, Paolo & Soderlind, Paul, 2003. "Inflation forecast uncertainty," European Economic Review, Elsevier, vol. 47(6), pages 1037-1059, December.
  9. Dreze, Jacques H. & Richard, Jean-Francois, 1983. "Bayesian analysis of simultaneous equation systems," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 9, pages 517-598 Elsevier.
  10. Lawrence, Michael & Goodwin, Paul & O'Connor, Marcus & Onkal, Dilek, 2006. "Judgmental forecasting: A review of progress over the last 25 years," International Journal of Forecasting, Elsevier, vol. 22(3), pages 493-518.
  11. Monica Billio & Roberto Casarin & Francesco Ravazzolo & Herman K. van Dijk, 2010. "Combining predictive densities using Bayesian filtering with applications to US economics data," Working Paper 2010/29, Norges Bank.
  12. Peter A. Morris, 1974. "Decision Analysis Expert Use," Management Science, INFORMS, vol. 20(9), pages 1233-1241, May.
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  14. Todd E. Clark & Michael W. McCracken, 2006. "Forecasting of small macroeconomic VARs in the presence of instabilities," Research Working Paper RWP 06-09, Federal Reserve Bank of Kansas City.
  15. Tom Stark & Dean Croushore, 2001. "Forecasting with a real-time data set for macroeconomists," Working Papers 01-10, Federal Reserve Bank of Philadelphia.
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  18. Guidolin, Massimo & Timmermann, Allan G, 2007. "Forecasts of US Short-term Interest Rates: A Flexible Forecast Combination Approach," CEPR Discussion Papers 6188, C.E.P.R. Discussion Papers.
  19. Kenneth F. Wallis, 2005. "Combining Density and Interval Forecasts: A Modest Proposal," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(s1), pages 983-994, December.
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  22. Mattias Villani, 2009. "Steady-state priors for vector autoregressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(4), pages 630-650.
  23. Rubaszek, Michal & Skrzypczynski, Pawel, 2008. "On the forecasting performance of a small-scale DSGE model," International Journal of Forecasting, Elsevier, vol. 24(3), pages 498-512.
  24. Manganelli, Simone, 2009. "Forecasting With Judgment," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(4), pages 553-563.
  25. Garthwaite, Paul H. & Kadane, Joseph B. & O'Hagan, Anthony, 2005. "Statistical Methods for Eliciting Probability Distributions," Journal of the American Statistical Association, American Statistical Association, vol. 100, pages 680-701, June.
  26. Dean Croushore, 1993. "Introducing: the survey of professional forecasters," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-15.
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