Selecting predictors by using Bayesian model averaging in bridge models
AbstractThis paper proposes the use of Bayesian model averaging (BMA) as a tool to select the predictors' set for bridge models. BMA is a computationally feasible method that allows us to explore the model space even in the presence of a large set of candidate predictors. We test the performance of BMA in now-casting by means of a recursive experiment for the euro area and the three largest countries. This method allows flexibility in selecting the information set month by month. We find that BMA based bridge models produce smaller forecast error than fixed composition bridges. In an application to the euro area they perform at least as well as medium-scale factor models.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 872.
Date of creation: Jul 2012
Date of revision:
business cycle analysis; forecasting; Bayesian model averaging; bridge models.;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
- NEP-ECM-2012-07-23 (Econometrics)
- NEP-FOR-2012-07-23 (Forecasting)
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- Carriero, Andrea & Clark, Todd & Marcellino, Massimiliano, 2013.
"Real-Time Nowcasting with a Bayesian Mixed Frequency Model with Stochastic Volatility,"
CEPR Discussion Papers
9312, C.E.P.R. Discussion Papers.
- Andrea Carriero & Todd E. Clark & Massimiliano Marcellino, 2012. "Real-time nowcasting with a Bayesian mixed frequency model with stochastic volatility," Working Paper 1227, Federal Reserve Bank of Cleveland.
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