Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72700
Authors: 
Costantini, Mauro
Gunter, Ulrich
Kunst, Robert M.
Year of Publication: 
2010
Series/Report no.: 
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 251
Abstract: 
We use data generated by a macroeconomic DSGE model to study the relative benefits of forecast combinations based on forecast-encompassing tests relative to simple uniformly weighted forecast averages across rival models. Assumed rival models are four linear autoregressive specifications, one of them a more sophisticated factor-augmented vector autoregression (FAVAR). The forecaster is assumed not to know the true data-generating DSGE model. The results critically depend on the prediction horizon. While one-step prediction hardly supports test-based combinations, the test-based procedure attains a clear lead at prediction horizons greater than two.
Subjects: 
combining forecasts
encompassing tests
model selection
time series
DSGE model
JEL: 
C15
C32
C53
Document Type: 
Working Paper

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