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Averaging forecasts from VARs with uncertain instabilities

Listed author(s):
  • Todd E. Clark

    (Federal Reserve Bank of Kansas City, Missouri, USA)

  • Michael W. McCracken

    (Federal Reserve Bank of St. Louis, Missouri, USA)

Recent work suggests VAR models of output, inflation, and interest rates may be prone to instabilities. In the face of such instabilities, a variety of estimation or forecasting methods might be used to improve the accuracy of forecasts from a VAR. The uncertainty inherent in any single representation of instability could mean that combining forecasts from a range of approaches will improve forecast accuracy. Focusing on models of US output, prices, and interest rates, this paper examines the effectiveness of combining various models of instability in improving VAR forecasts made with real-time data. Copyright © 2009 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.1127
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File URL: http://qed.econ.queensu.ca:80/jae/2010-v25.1/
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 25 (2010)
Issue (Month): 1 ()
Pages: 5-29

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Handle: RePEc:jae:japmet:v:25:y:2010:i:1:p:5-29
DOI: 10.1002/jae.1127
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