Forecasting Inflation Using Dynamic Model Averaging
AbstractWe forecast quarterly US inflation based on the generalized Phillips curve using econometric methods which incorporate dynamic model averaging. These methods not only allow for coeÃ‚Â¢ cients to change over time, but also allow for the entire forecasting model to change over time. We find that dynamic model averaging leads to substantial forecasting improvements over simple benchmark regressions and more sophisticated approaches such as those using time varying coefficient models. We also provide evidence on which sets of predictors are relevant for forecasting in each period.
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Bibliographic InfoPaper provided by University of Strathclyde Business School, Department of Economics in its series Working Papers with number 1119.
Length: 33 pages
Date of creation: Apr 2011
Date of revision:
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Bayesian; State space model; Phillips curve;
Other versions of this item:
- Gary Koop & Dimitris Korobilis, 2012. "Forecasting Inflation Using Dynamic Model Averaging," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(3), pages 867-886, 08.
- Koop, Gary & Korobilis, Dimitris, 2011. "Forecasting Inflation Using Dynamic Model Averaging," SIRE Discussion Papers 2011-40, Scottish Institute for Research in Economics (SIRE).
- Koop, Gary & Korobilis, Dimitris, 2010. "Forecasting Inflation Using Dynamic Model Averaging," SIRE Discussion Papers 2010-113, Scottish Institute for Research in Economics (SIRE).
- Gary Koop & Dimitris Korobilis, 2009. "Forecasting Inflation Using Dynamic Model Averaging," Working Paper Series 34_09, The Rimini Centre for Economic Analysis, revised Jan 2009.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- 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-2011-06-11 (All new papers)
- NEP-CBA-2011-06-11 (Central Banking)
- NEP-ETS-2011-06-11 (Econometric Time Series)
- NEP-FOR-2011-06-11 (Forecasting)
- NEP-MAC-2011-06-11 (Macroeconomics)
- NEP-MON-2011-06-11 (Monetary Economics)
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