IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Averaging forecasts from VARs with uncertain instabilities

Listed author(s):
  • Todd E. Clark
  • Michael W. McCracken

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 U.S. 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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://research.stlouisfed.org/wp/2008/2008-030.pdf
Download Restriction: no

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2008-030.

as
in new window

Length:
Date of creation: 2008
Handle: RePEc:fip:fedlwp:2008-030
Contact details of provider: Postal:
P.O. Box 442, St. Louis, MO 63166

Fax: (314)444-8753
Web page: http://www.stlouisfed.org/

More information through EDIRC

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window

  1. 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.
  2. Gary Koop & Simon Potter, 2004. "Forecasting in dynamic factor models using Bayesian model averaging," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 550-565, December.
  3. Robert B. Litterman, 1985. "Forecasting with Bayesian vector autoregressions five years of experience," Working Papers 274, Federal Reserve Bank of Minneapolis.
  4. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  5. Todd E. Clark & Michael W. McCracken, 2006. "Combining forecasts from nested models," Research Working Paper RWP 06-02, Federal Reserve Bank of Kansas City.
  6. 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.
  7. Ang, Andrew & Bekaert, Geert & Wei, Min, 2007. "Do macro variables, asset markets, or surveys forecast inflation better?," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1163-1212, May.
  8. Phillips, Peter C B, 1996. "Econometric Model Determination," Econometrica, Econometric Society, vol. 64(4), pages 763-812, July.
  9. Jana Eklund & Sune Karlsson, 2007. "Forecast Combination and Model Averaging Using Predictive Measures," Econometric Reviews, Taylor & Francis Journals, vol. 26(2-4), pages 329-363.
  10. Hallman, Jeffrey J & Porter, Richard D & Small, David H, 1991. "Is the Price Level Tied to the M2 Monetary Aggregate in the Long Run?," American Economic Review, American Economic Association, vol. 81(4), pages 841-858, September.
  11. Anthony Garratt & Gary Koop & ShaunP. Vahey, 2008. "Forecasting Substantial Data Revisions in the Presence of Model Uncertainty," Economic Journal, Royal Economic Society, vol. 118(530), pages 1128-1144, 07.
  12. Malin Adolfson & Michael K. Andersson & Jesper Lindé & Mattias Villani & Anders Vredin, 2007. "Modern Forecasting Models in Action: Improving Macroeconomic Analyses at Central Banks," International Journal of Central Banking, International Journal of Central Banking, vol. 3(4), pages 111-144, December.
  13. Gary Koop & Simon M. Potter & Rodney W. Strachan, 2005. "Re-examining the Consumption-Wealth Relationship: The Role of Model Uncertainty," Discussion Papers in Economics 05/3, Department of Economics, University of Leicester.
  14. John C. Robertson & Ellis W. Tallman, 1999. "Improving forecasts of the federal funds rate in a policy model," FRB Atlanta Working Paper 99-3, Federal Reserve Bank of Atlanta.
  15. Dean Croushore, 1993. "Introducing: the survey of professional forecasters," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-15.
  16. David H. Romer & Christina D. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, vol. 90(3), pages 429-457, June.
  17. West, Kenneth D., 2006. "Forecast Evaluation," Handbook of Economic Forecasting, Elsevier.
  18. Kapetanios, G. & Labhard, V. & Price, S., 2007. "Forecasting using Bayesian and information theoretic model averaging: an application to UK inflation," Working Papers 07/15, Department of Economics, City University London.
  19. Gary M. Koop & Simon M. Potter, 2004. "Forecasting and Estimating Multiple Change-point Models with an Unknown Number of Change-points," Discussion Papers in Economics 04/31, Department of Economics, University of Leicester.
  20. Clark, Todd E. & McCracken, Michael W., 2006. "The Predictive Content of the Output Gap for Inflation: Resolving In-Sample and Out-of-Sample Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1127-1148, August.
  21. Jean Boivin, 2005. "Has US Monetary Policy Changed? Evidence from Drifting Coefficients and Real-Time Data," NBER Working Papers 11314, National Bureau of Economic Research, Inc.
  22. Mark W. Watson & James H. Stock, 2004. "Combination forecasts of output growth in a seven-country data set," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(6), pages 405-430.
  23. Tor Jacobson & Per Jansson & Anders Vredin & Anders Warne, 2001. "Monetary policy analysis and inflation targeting in a small open economy: a VAR approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(4), pages 487-520.
  24. Carlo A. Favero & Massimiliano Marcellino, 2005. "Modelling and Forecasting Fiscal Variables for the Euro Area," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(s1), pages 755-783, December.
  25. David F. Hendry & Michael P. Clements, 2004. "Pooling of forecasts," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 1-31, 06.
  26. Todd E. Clark & Michael W. McCracken, 2004. "Improving forecast accuracy by combining recursive and rolling forecasts," Research Working Paper RWP 04-10, Federal Reserve Bank of Kansas City.
  27. Sharon Kozicki & Peter A. Tinsley, 1997. "Shifting endpoints in the term structure of interest rates," Research Working Paper 97-08, Federal Reserve Bank of Kansas City.
  28. Hansen, Peter Reinhard, 2005. "A Test for Superior Predictive Ability," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 365-380, October.
  29. Sharon Kozicki & Peter A. Tinsley, 2002. "Alternative sources of the lag dynamics of inflation," Research Working Paper RWP 02-12, Federal Reserve Bank of Kansas City.
  30. Timothy Cogley, 1998. "A simple adaptive measure of core inflation," Working Papers in Applied Economic Theory 98-06, Federal Reserve Bank of San Francisco.
  31. James H. Stock & Mark W. Watson, 2006. "Why Has U.S. Inflation Become Harder to Forecast?," NBER Working Papers 12324, National Bureau of Economic Research, Inc.
  32. D'Agostino, Antonello & Giannone, Domenico & Surico, Paolo, 2007. "(Un)Predictability and Macroeconomic Stability," CEPR Discussion Papers 6594, C.E.P.R. Discussion Papers.
  33. Timothy Cogley & Thomas J. Sargent, 2005. "Drift and Volatilities: Monetary Policies and Outcomes in the Post WWII U.S," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(2), pages 262-302, April.
  34. Corradi, Valentina & Swanson, Norman R., 2006. "Predictive Density Evaluation," Handbook of Economic Forecasting, Elsevier.
  35. Timothy Cogley & Thomas Sargent, "undated". "Evolving Post-World War II U.S. Inflation Dynamics," Working Papers 2132872, Department of Economics, W. P. Carey School of Business, Arizona State University.
  36. Flint Brayton & Eileen Mauskopf & David L. Reifschneider & Peter A. Tinsley & John Williams, 1997. "The role of expectations in the FRB/US macroeconomic model," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 227-245.
  37. Yeung Lewis Chan & James H. Stock & Mark W. Watson, 1999. "A dynamic factor model framework for forecast combination," Spanish Economic Review, Springer;Spanish Economic Association, vol. 1(2), pages 91-121.
  38. Croushore, Dean, 2006. "Forecasting with Real-Time Macroeconomic Data," Handbook of Economic Forecasting, Elsevier.
  39. Marco Del Negro & Frank Schorfheide, 2004. "Priors from General Equilibrium Models for VARS," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 643-673, 05.
  40. Beyer, Andreas & Farmer, Roger E. A., 2002. "Natural rate doubts," Working Paper Series 0121, European Central Bank.
  41. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1983. "Forecasting and Conditional Projection Using Realistic Prior Distributions," NBER Working Papers 1202, National Bureau of Economic Research, Inc.
  42. Pesaran, M. Hashem & Timmermann, Allan, 2007. "Selection of estimation window in the presence of breaks," Journal of Econometrics, Elsevier, vol. 137(1), pages 134-161, March.
  43. Marco Aiolfi & Carlos Capistrán & Allan Timmermann, 2010. "Forecast Combinations," Working Papers 2010-04, Banco de México.
  44. Dean Croushore & Tom Stark, 1999. "A real-time data set for macroeconomists," Working Papers 99-4, Federal Reserve Bank of Philadelphia.
  45. Campbell, Sean D., 2007. "Macroeconomic Volatility, Predictability, and Uncertainty in the Great Moderation: Evidence From the Survey of Professional Forecasters," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 191-200, April.
  46. Aiolfi, Marco & Timmermann, Allan, 2006. "Persistence in forecasting performance and conditional combination strategies," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 31-53.
  47. Tim W. Cogley, 2003. "Drifts and Volatilities: Monetary Policies and Outcomes in the Post War U.S," Working Papers 35, University of California, Davis, Department of Economics.
  48. Clements, Michael P & Hendry, David F, 1996. "Intercept Corrections and Structural Change," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(5), pages 475-494, Sept.-Oct.
  49. Kozicki, Sharon & Hoffman, Barak, 2004. "Rounding Error: A Distorting Influence on Index Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 319-338, June.
  50. Halbert White, 2000. "A Reality Check for Data Snooping," Econometrica, Econometric Society, vol. 68(5), pages 1097-1126, September.
  51. Arturo Estrella & Jeffrey C. Fuhrer, 2003. "Monetary Policy Shifts and the Stability of Monetary Policy Models," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 94-104, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:2008-030. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.