Density forecasting through disaggregation
AbstractIn this paper, the revised expectations model (REM) is developed to incorporate economic agents’ price expectation formation effects. With this incorporation, two models, an aggregate one sector model and a disaggregated multi-sector model, are estimated and used in density forecasting of the US real GDP growth rate. The experiment shows that use of the disaggregated version of the model, which incorporates price expectation effects along with modern Bayesian MCMC estimation and prediction techniques, produces more precise density forecasts than those yielded by either an aggregate version or benchmark forecasting models.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Forecasting.
Volume (Year): 27 (2011)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/ijforecast
Density forecast; Revised expectations model; Disaggregation; Hierarchical model; Shrinkage effect; Bayesian MCMC;
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