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Pooling Forecasts In Linear Rational Expectations Models

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  • Gregor W. Smith

Abstract

Estimating linear rational expectations models requires replacingthe expectations of future, endogenous variables either withforecasts from a fully solved model, or with the instrumentedactual values, or with forecast survey data. Extending the methodsof McCallum (1976) and Gottfries and Persson (1988), I show how topool these methods and also use actual, future values of thesevariables to improve statistical efficiency. The method isillustrated with an application using SPF survey data in the USPhillips curve, where the output gap plays a significant role butlagged inflation plays none.

Suggested Citation

  • Gregor W. Smith, 2007. "Pooling Forecasts In Linear Rational Expectations Models," Working Paper 1129, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1129
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    Cited by:

    1. James Yetman & Gregor W. Smith, 2007. "The Curse Of Irving Fisher (professional Forecasters' Version)," Working Paper 1144, Economics Department, Queen's University.
    2. Ricardo Nunes, 2010. "Inflation Dynamics: The Role of Expectations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(6), pages 1161-1172, September.
    3. Paul Hubert & Harun Mirza, 2014. "Inflation expectation dynamics: the role of past present and forward looking information," Sciences Po publications 2014-07, Sciences Po.
    4. Sophocles Mavroeidis & Mikkel Plagborg-Møller & James H. Stock, 2014. "Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 124-188, March.
    5. Paul Hubert & Harun Mirza, 2019. "The role of forward‐ and backward‐looking information for inflation expectations formation," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 38(8), pages 733-748, December.
    6. James M. Nason & Gregor W. Smith, 2008. "The New Keynesian Phillips curve : lessons from single-equation econometric estimation," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 94(Fall), pages 361-395.
    7. repec:hal:wpspec:info:hdl:2441/6g0gsihsjmn5snc9pb0hlas97 is not listed on IDEAS
    8. repec:spo:wpecon:info:hdl:2441/6g0gsihsjmn5snc9pb0hlas97 is not listed on IDEAS
    9. repec:hal:spmain:info:hdl:2441/3v5mev848s8148gjqcbf4mva5q is not listed on IDEAS
    10. repec:hal:spmain:info:hdl:2441/6g0gsihsjmn5snc9pb0hlas97 is not listed on IDEAS
    11. Víctor López-Pérez, 2017. "Do professional forecasters behave as if they believed in the New Keynesian Phillips Curve for the euro area?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(1), pages 147-174, February.

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    More about this item

    Keywords

    rational expectations; recursive projection; Phillips curve;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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