Forecasting Monetary Policy Decisions in Australia: A Forecast Combinations Approach
Article first published online: 5 DEC 2011
Copyright © 2011 John Wiley & Sons, Ltd.
Journal of Forecasting
Volume 32, Issue 2, pages 151–166, March 2013
How to Cite
Vasnev, A., Skirtun, M. and Pauwels, L. (2013), Forecasting Monetary Policy Decisions in Australia: A Forecast Combinations Approach. J. Forecast., 32: 151–166. doi: 10.1002/for.1261
- Issue published online: 28 JAN 2013
- Article first published online: 5 DEC 2011
- Manuscript Accepted: 23 AUG 2011
- Manuscript Received: 24 FEB 2011
- target rate;
- probit model;
- forecast combination;
- mixed data frequencies
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 & Sons, Ltd.