Forecasting Monetary Policy Decisions in Australia: A Forecast Combinations Approach. (5th December 2011)

• Record Type: Journal Article
• Authors: Vasnev, Andrey; Skirtun, Margaret; Pauwels, Laurent
• Is Part Of: Journal of forecasting. Volume 32:Number 2(2013:Mar.)
• Page Start: 151
• Page End: 166
• Publication Date: 2011-12-05
• Subjects: Forecasting -- Periodicals; Forecasting -- Mathematical models -- Periodicals; 003.2
• DOI: 10.1002/for.1261
• Languages: English
• ISSNs: 0277-6693

Abstract

<abstract abstract-type="main" id="for1261-abs-0001"> <title>ABSTRACT</title> <p id="for1261-para-0004">This paper applies a triple‐choice ordered probit model, corrected for nonstationarity to forecast monetary decisions of the Reserve Bank of Australia. The forecast models incorporate a mix of monthly and quarterly macroeconomic time series. Forecast combination is used as an alternative to one multivariate model to improve accuracy of out‐of‐sample forecasts. This accuracy is evaluated with scoring functions, which are also used to construct adaptive weights for combining probability forecasts. This paper finds that combined forecasts outperform multivariable models. These results are robust to different sample sizes and estimation windows. Copyright © 2011 John Wiley &amp; Sons, Ltd.</p> </abstract>