Forecasting the Swiss Economy Using VECX* Models: An Exercise in Forecast Combination Across Modelsand Observation Windows
This paper uses vector error correction models of Switzerland for forecasting output, inflation and the short-term interest rate. It considers three different ways of dealing with forecast uncertainties. First, it investigates the effect on forecasting performance of averaging over forecasts from different models. Second, it considers averaging forecasts from different estimation windows. It is found that averaging over estimation windows is at least as effective as averaging over different models and both complement each other. Third, it examines whether using weighting schemes from the machine learning literature improves the average forecast. Compared to equal weights the effect of alternative weighting schemes on forecast accuracy is small in the present application.
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- Katrin Assenmacher-Wesche & M. Hashem Pesaran, 2008.
"A VECX Model of the Swiss Economy,"
CESifo Working Paper Series
2281, CESifo Group Munich.
- Assenmacher-Wesche, K. & Pesaran, M.H., 2008. "A VECX* Model of the Swiss Economy," Cambridge Working Papers in Economics 0809, Faculty of Economics, University of Cambridge.
- Katrin Assenmacher-Wesche & M. Hashem Pesaran, 2009. "A VECX* model of the Swiss economy," Economic Studies 2009-06, Swiss National Bank.