Special Issue Article - Model Uncertainty and Macroeconomics
Averaging forecasts from VARs with uncertain instabilities
Version of Record online: 30 OCT 2009
Copyright © 2009 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Special Issue: Model Uncertainty and Macroeconomics
Volume 25, Issue 1, pages 5–29, January/February 2010
How to Cite
Clark, T. E. and McCracken, M. W. (2010), Averaging forecasts from VARs with uncertain instabilities. J. Appl. Econ., 25: 5–29. doi: 10.1002/jae.1127
- Issue online: 18 JAN 2010
- Version of Record online: 30 OCT 2009
- Reserve Bank of New Zealand
- Centre For Applied Macroeconomic Analysis
Recent work suggests VAR models of output, inflation, and interest rates may be prone to instabilities. In the face of such instabilities, a variety of estimation or forecasting methods might be used to improve the accuracy of forecasts from a VAR. The uncertainty inherent in any single representation of instability could mean that combining forecasts from a range of approaches will improve forecast accuracy. Focusing on models of US output, prices, and interest rates, this paper examines the effectiveness of combining various models of instability in improving VAR forecasts made with real-time data. Copyright © 2009 John Wiley & Sons, Ltd.