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A Bayesian method of combining judgmental and model-based density forecasts

  • Kocięcki, Andrzej
  • Kolasa, Marcin
  • Rubaszek, Michał

This paper introduces a formal method of combining expert and model density forecasts when the sample of past forecasts is unavailable. It works directly with the expert forecast density and endogenously delivers weights for forecast combination, relying on probability rules only. The empirical part of the paper illustrates how the framework can be applied in forecasting US inflation by mixing density forecasts from an autoregressive model and the Survey of Professional Forecasters.

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File URL: http://www.sciencedirect.com/science/article/pii/S0264999312000600
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 4 ()
Pages: 1349-1355

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:4:p:1349-1355
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Tom Stark and Dean Croushore, 2001. "Forecasting with a Real-Time Data Set for Macroeconomists," Computing in Economics and Finance 2001 258, Society for Computational Economics.
  2. Todd E. Clark & Michael W. McCracken, 2007. "Tests of equal predictive ability with real-time data," Research Working Paper RWP 07-06, Federal Reserve Bank of Kansas City.
  3. Croushore Dean, 2010. "An Evaluation of Inflation Forecasts from Surveys Using Real-Time Data," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-32, May.
  4. Francis X. Diebold & Robert S. Mariano, 1994. "Comparing Predictive Accuracy," NBER Technical Working Papers 0169, National Bureau of Economic Research, Inc.
  5. Min, Chung-ki & Zellner, Arnold, 1993. "Bayesian and non-Bayesian methods for combining models and forecasts with applications to forecasting international growth rates," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 89-118, March.
  6. Söderlind, Paul, 2000. "Inflation Forecast Uncertainty," CEPR Discussion Papers 2499, C.E.P.R. Discussion Papers.
  7. Mattias Villani, 2009. "Steady-state priors for vector autoregressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(4), pages 630-650.
  8. Dean Croushore, 1993. "Introducing: the survey of professional forecasters," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-15.
  9. Massimo Guidolin & Allan Timmerman, 2007. "Forecasts of U.S. short-term interest rates: a flexible forecast combination approach," Working Papers 2005-059, Federal Reserve Bank of St. Louis.
  10. Croushore, Dean & Stark, Tom, 2001. "A real-time data set for macroeconomists," Journal of Econometrics, Elsevier, vol. 105(1), pages 111-130, November.
  11. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research 35, National Bank of Belgium.
  12. Anne-Sofie Jore & James Mitchell & Shaun P. Vahey, 2008. "Combining forecast densities from VARs with uncertain instabilities," Working Paper 2008/01, Norges Bank.
  13. Christoffersen, Peter F, 1998. "Evaluating Interval Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 841-62, November.
  14. Lawrence, Michael & Goodwin, Paul & O'Connor, Marcus & Onkal, Dilek, 2006. "Judgmental forecasting: A review of progress over the last 25 years," International Journal of Forecasting, Elsevier, vol. 22(3), pages 493-518.
  15. Elliott, Graham & Timmermann, Allan, 2002. "Optimal Forecast Combination Under General Loss Functions and Forecast Error Distributions," University of California at San Diego, Economics Working Paper Series qt15r9t2q2, Department of Economics, UC San Diego.
  16. Todd E. Clark & Michael W. McCracken, 2006. "Forecasting of small macroeconomic VARs in the presence of instabilities," Research Working Paper RWP 06-09, Federal Reserve Bank of Kansas City.
  17. James Mitchell & Stephen G. Hall, 2005. "Evaluating, Comparing and Combining Density Forecasts Using the KLIC with an Application to the Bank of England and NIESR 'Fan' Charts of Inflation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(s1), pages 995-1033, December.
  18. Robert L. Winkler, 1981. "Combining Probability Distributions from Dependent Information Sources," Management Science, INFORMS, vol. 27(4), pages 479-488, April.
  19. Kenneth F. Wallis, 2005. "Combining Density and Interval Forecasts: A Modest Proposal," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(s1), pages 983-994, December.
  20. Dreze, Jacques H. & Richard, Jean-Francois, 1983. "Bayesian analysis of simultaneous equation systems," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 9, pages 517-598 Elsevier.
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  22. Manganelli, Simone, 2009. "Forecasting With Judgment," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(4), pages 553-563.
  23. Garthwaite, Paul H. & Kadane, Joseph B. & O'Hagan, Anthony, 2005. "Statistical Methods for Eliciting Probability Distributions," Journal of the American Statistical Association, American Statistical Association, vol. 100, pages 680-701, June.
  24. Peter A. Morris, 1974. "Decision Analysis Expert Use," Management Science, INFORMS, vol. 20(9), pages 1233-1241, May.
  25. Hall, Stephen G. & Mitchell, James, 2007. "Combining density forecasts," International Journal of Forecasting, Elsevier, vol. 23(1), pages 1-13.
  26. repec:dgr:uvatin:20110003 is not listed on IDEAS
  27. Rubaszek, Michal & Skrzypczynski, Pawel, 2008. "On the forecasting performance of a small-scale DSGE model," International Journal of Forecasting, Elsevier, vol. 24(3), pages 498-512.
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