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Real-time inflation forecast densities from ensemble Phillips curves

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  • Garratt, Anthony
  • Mitchell, James
  • Vahey, Shaun P.
  • Wakerly, Elizabeth C.

Abstract

We examine the effectiveness of recursive-weight and equal-weight combination strategies for forecasting using many time-varying models of the relationship between inflation and the output gap. The forecast densities for inflation reflect the uncertainty across models using many statistical measures of the output gap, and allow for time-variation in the ensemble Phillips curves. Using real-time data for the US, Australia, New Zealand and Norway, we find that the recursive-weight strategy performs well, consistently giving well-calibrated forecast densities. The equal-weight strategy generates poorly-calibrated forecast densities for the US and Australian samples. There is little difference between the two strategies for our New Zealand and Norwegian data. We also find that the ensemble modelling approach performs more consistently with real-time data than with revised data in all four countries.

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Bibliographic Info

Article provided by Elsevier in its journal The North American Journal of Economics and Finance.

Volume (Year): 22 (2011)
Issue (Month): 1 (January)
Pages: 77-87

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Handle: RePEc:eee:ecofin:v:22:y:2011:i:1:p:77-87

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Web page: http://www.elsevier.com/locate/inca/620163

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Keywords: Density combination Ensemble forecasting Phillips curve;

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References

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Cited by:
  1. repec:syb:wpbsba:01/2013 is not listed on IDEAS
  2. Garratt, Anthony & Mitchell, James & Vahey, Shaun P., 2014. "Measuring output gap nowcast uncertainty," International Journal of Forecasting, Elsevier, vol. 30(2), pages 268-279.
  3. Pauwels, Laurent & Vasnev, Andrey, 2013. "Forecast combination for U.S. recessions with real-time data," Working Papers 02/2013, University of Sydney Business School, Discipline of Business Analytics.
  4. Shaun P Vahey & Elizabeth C Wakerly, 2013. "Moving towards probability forecasting," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and inflation dynamics in Asia and the Pacific, volume 70, pages 3-8 Bank for International Settlements.
  5. Hilde Bjørnland & Karsten Gerdrup & Christie Smith & Anne Sofie Jore & Leif Anders Thorsrud, 2010. "Weights and pools for a Norwegian density combination," Working Paper 2010/06, Norges Bank.

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