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Forecasting house price inflation: a model combination approach

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    Abstract

    In this paper we use a range of statistical models to forecast New Zealand house price in ation. We address the issue of model uncertainty by combining forecasts using weights based on out-of-sample forecast performance. We consider how the combined forecast for house prices performs relative to both the individual model forecasts and the Reserve Bank of New Zealand's house price forecasts. We find that the combination forecast is on par with the best of the models for most forecast horizons, and has produced lower root mean squared forecast errors than the Reserve Bank's forecasts.

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    File URL: http://www.rbnz.govt.nz/research_and_publications/discussion_papers/2011/dp11_07.pdf
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    Bibliographic Info

    Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number DP2011/07.

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    Length: 32 p.
    Date of creation: Nov 2011
    Date of revision:
    Handle: RePEc:nzb:nzbdps:2011/07

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    1. Rangan Gupta & Alain Kabundi & Stephen M. Miller, 2009. "Forecasting the US Real House Price Index: Structural and Non-Structural Models with and without Fundamentals," Working papers 2009-42, University of Connecticut, Department of Economics.
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    7. Muellbauer, John, 2008. "Housing, Credit and Consumer Expenditure," CEPR Discussion Papers 6782, C.E.P.R. Discussion Papers.
    8. Hilde C. Bjørnland & Karsten Gerdrup & Anne Sofie Jore & Christie Smith & Leif Anders Thorsrud, 2012. "Does Forecast Combination Improve Norges Bank Inflation Forecasts?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(2), pages 163-179, 04.
    9. Chris Bloor & Troy Matheson, 2008. "Analysing shock transmission in a data-rich environment: A large BVAR for New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2008/09, Reserve Bank of New Zealand.
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    11. Peter Abelson & Roselyne Joyeux & George Milunovich & Demi Chung, 2005. "Explaining House Prices in Australia: 1970-2003," The Economic Record, The Economic Society of Australia, vol. 81(s1), pages S96-S103, 08.
    12. Marta Bańbura, 2008. "Large Bayesian VARs," 2008 Meeting Papers 334, Society for Economic Dynamics.
    13. Das, Sonali & Gupta, Rangan & Kabundi, Alain, 2009. "Could we have predicted the recent downturn in the South African housing market?," Journal of Housing Economics, Elsevier, vol. 18(4), pages 325-335, December.
    14. Nikola Dvornak & Marion Kohler, 2007. "Housing Wealth, Stock Market Wealth and Consumption: A Panel Analysis for Australia," The Economic Record, The Economic Society of Australia, vol. 83(261), pages 117-130, 06.
    15. Leslie Hull, 2003. "Financial deregulation and household indebtedness," Reserve Bank of New Zealand Discussion Paper Series DP2003/01, Reserve Bank of New Zealand.
    16. Andrew Coleman & John Landon-Lane, 2007. "Housing Markets and Migration in New Zealand, 1962-2006," Reserve Bank of New Zealand Discussion Paper Series DP2007/12, Reserve Bank of New Zealand.
    17. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-62, April.
    18. Emmanuel De Veirman & Ashley Dunstan, 2008. "How do Housing Wealth, Financial Wealth and Consumption Interact? Evidence from New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2008/05, Reserve Bank of New Zealand.
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