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Evaluating ensemble density combination - forecasting GDP and inflation

Listed author(s):
  • Karsten R. Gerdrup

    ()

    (Norges Bank (Central Bank of Norway))

  • Anne Sofie Jore

    ()

    (Norges Bank (Central Bank of Norway))

  • Christie Smith

    (Reserve Bank of New Zealand)

  • Leif Anders Thorsrud

    ()

    (Norges Bank (Central Bank of Norway))

Forecast 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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File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2009/WP-200919/
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Paper provided by Norges Bank in its series Working Paper with number 2009/19.

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Length: 37 pages
Date of creation: 11 Nov 2009
Handle: RePEc:bno:worpap:2009_19
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  2. 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.
  3. Christian Kascha & Francesco Ravazzolo, 2010. "Combining inflation density forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(1-2), pages 231-250.
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  9. repec:nsr:niesrd:337 is not listed on IDEAS
  10. Makridakis, Spyros & Chatfield, Chris & Hibon, Michele & Lawrence, Michael & Mills, Terence & Ord, Keith & Simmons, LeRoy F., 1993. "The M2-competition: A real-time judgmentally based forecasting study," International Journal of Forecasting, Elsevier, vol. 9(1), pages 5-22, April.
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  26. Robert T. Clemen, 1987. "Combining Overlapping Information," Management Science, INFORMS, vol. 33(3), pages 373-380, March.
  27. Geweke, John & Amisano, Gianni, 2010. "Comparing and evaluating Bayesian predictive distributions of asset returns," International Journal of Forecasting, Elsevier, vol. 26(2), pages 216-230, April.
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