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    Real-time inflation forecast densities from ensemble phillips curves

    Garratt, Anthony and Mitchell, J. and Vahey, S.P. and Wakerly, E.C. (2009) Real-time inflation forecast densities from ensemble phillips curves. Working Paper. Birkbeck College, University of London, London, UK.

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    Abstract

    A popular macroeconomic forecasting strategy takes combinations across many models to hedge against model instabilities of unknown timing; see (among others) Stock andWatson (2004) and Clark and McCracken (2009). In this paper, we examine the effectiveness of recursive-weight and equal-weight combination strategies for density forecasting using a time-varying Phillips curve relationship between inflation and the output gap. The densities reflect the uncertainty across a large number of models using many statistical measures of the output gap, allowing for a single structural break of unknown timing. We use real-time data for the US, Australia, New Zealand and Norway. Our main finding is that the recursive-weight strategy performs well across the real-time data sets, consistently giving well-calibrated forecast densities. The equal-weight strategy generates poorly-calibrated forecast densities for the US and Australian samples. There is little difference between the two strategies for our New Zealand and Norwegian data. We also find that the ensemble modeling approach performs more consistently with real-time data than with revised data in all four countries.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: BWPEF 0910
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 10 Jul 2013 13:10
    Last Modified: 10 Jul 2013 13:10
    URI: http://eprints.bbk.ac.uk/id/eprint/7612

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