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Forecast Combination and Model Averaging Using Predictive Measures

JEL codes: 
C11, C51, C52, C53
Version Date: 
Sep 2005

We extend the standard approach to Bayesian forecast combination by forming the weights for the model averaged forecast from the predictive likelihood rather than the standard marginal likelihood. The use of predictive measures of fit offers greater protection against in-sample overfitting and improves forecast performance.

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