Macroeconomic forecasting in the euro area using predictive combinations of DSGE models

Čapek, Jan and Crespo Cuaresma, Jesús and Hauzenberger, Niko and Reichel, Vlastimil (2023) Macroeconomic forecasting in the euro area using predictive combinations of DSGE models. International Journal of Forecasting, 39 (4). pp. 1820-1838. ISSN 0169-2070 (https://doi.org/10.1016/j.ijforecast.2022.09.002)

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Abstract

We provide a comprehensive assessment of the predictive power of combinations of dynamic stochastic general equilibrium (DSGE) models for GDP growth, inflation, and the interest rate in the euro area. We employ a battery of static and dynamic pooling weights based on Bayesian model averaging principles, prediction pools, and dynamic factor representations, and entertain six different DSGE specifications and five prediction weighting schemes. Our results indicate that exploiting mixtures of DSGE models produces competitive forecasts compared to individual specifications for both point and density forecasts over the last three decades. Although these combinations do not tend to systematically achieve superior forecast performance, we find improvements for particular periods of time and variables when using prediction pooling, dynamic model averaging, and combinations of forecasts based on Bayesian predictive synthesis.

  • Item type:Article
    ID code:86766
    Dates:
    Date
    Event
    1 October 2023
    Published
    22 October 2022
    Published Online
    1 October 2022
    Accepted
    Subjects:Social Sciences > Economic Theory
    Department:Strathclyde Business School > Economics
    Depositing user: Pure Administrator
    Date deposited:22 Sep 2023 15:37
    Last modified:04 May 2024 01:37
    URI:https://strathprints.strath.ac.uk/id/eprint/86766
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