NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Raiden Hasegawa

The Wharton School
University of Pennsylvania
Department of Statistics
400 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340

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Institutional Affiliation: Wharton School

NBER Working Papers and Publications

October 2014Dynamic Prediction Pools: An Investigation of Financial Frictions and Forecasting Performance
with Marco Del Negro, Frank Schorfheide: w20575
We provide a novel methodology for estimating time-varying weights in linear prediction pools, which we call Dynamic Pools, and use it to investigate the relative forecasting performance of DSGE models with and without financial frictions for output growth and inflation from 1992 to 2011. We find strong evidence of time variation in the pool's weights, reflecting the fact that the DSGE model with financial frictions produces superior forecasts in periods of financial distress but does not perform as well in tranquil periods. The dynamic pool's weights react in a timely fashion to changes in the environment, leading to real-time forecast improvements relative to other methods of density forecast combination, such as Bayesian Model Averaging, optimal (static) pools, and equal weights. We s...

Published: Del Negro, Marco & Hasegawa, Raiden B. & Schorfheide, Frank, 2016. "Dynamic prediction pools: An investigation of financial frictions and forecasting performance," Journal of Econometrics, Elsevier, vol. 192(2), pages 391-405. citation courtesy of

 
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