Evaluating ensemble density combination - forecasting GDP and inflation
AbstractForecast combination has become popular in central banks as a means to improve forecasts and to alleviate the risk of selecting poor models. However, if a model suite is populated with many similar models, then the weight attached to other independent models may be lower than warranted by their performance. One way to mitigate this problem is to group similar models into distinct `ensembles'. Using the original suite of models in Norges Bank's system for averaging models (SAM), we evaluate whether forecast performance can be improved by combining ensemble densities, rather than combining individual model densities directly. We evaluate performance both in terms of point forecasts and density forecasts, and test whether the densities are well-calibrated. We find encouraging results for combining ensembles.
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Bibliographic InfoPaper provided by Norges Bank in its series Working Paper with number 2009/19.
Length: 37 pages
Date of creation: 11 Nov 2009
Date of revision:
forecasting; density combination; model combination; clustering; ensemble density; pits.;
Find related papers by JEL classification:
- 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
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-05 (All new papers)
- NEP-CBA-2009-12-05 (Central Banking)
- NEP-ECM-2009-12-05 (Econometrics)
- NEP-FOR-2009-12-05 (Forecasting)
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- Falch, Nina Skrove & Nymoen, Ragnar, 2011.
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- Knut Are Aastveit & Karsten R. Gerdrup & Anne Sofie Jore & Leif Anders Thorsrud, 2014. "Nowcasting GDP in Real Time: A Density Combination Approach," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 32(1), pages 48-68, January.
- Knut Are Aastveit & Karsten R. Gerdrup & Anne Sofie Jore & Leif Anders Thorsrud, 2011. "Nowcasting GDP in real-time: A density combination approach," Working Paper 2011/11, Norges Bank.
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