Please use this identifier to cite or link to this item:
Baumeister, Christiane
Kilian, Lutz
Lee, Thomas K.
Year of Publication: 
Series/Report no.: 
Bank of Canada Working Paper 2014-46
The answer as to whether there are gains from pooling real-time oil price forecasts depends on the objective. The approach of combining five of the leading forecasting models with equal weights dominates the strategy of selecting one model and using it for all horizons up to two years. Even more accurate forecasts, however, are obtained when allowing the forecast combinations to vary across forecast horizons. While the latter approach is not always more accurate than selecting the single most accurate forecasting model by horizon, its accuracy can be shown to be much more stable over time. The mean-squared prediction error of real-time pooled forecasts is between 3% and 29% lower than that of the no-change forecast and its directional accuracy as high as 73%. Our results are robust to alternative oil price measures and apply to monthly as well as quarterly forecasts. We illustrate how forecast pooling may be used to produce real-time forecasts of the real and the nominal price of oil in a format consistent with that employed by the U.S. Energy Information Administration in releasing its short-term oil price forecasts, and we compare these forecasts during key historical episodes.
Econometric and statistical methods
International topics
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
393.91 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.