Macroeconomic Forecasting Performance under Alternative Specifications of Time-Varying Volatility
Version of Record online: 21 JAN 2014
Copyright © 2014 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 30, Issue 4, pages 551–575, June/July 2015
How to Cite
2015), Macroeconomic Forecasting Performance under Alternative Specifications of Time-Varying Volatility. J. Appl. Econ., 30, 551–575. doi: 10.1002/jae.2379., and (
- Issue online: 9 JUN 2015
- Version of Record online: 21 JAN 2014
- Manuscript Accepted: 4 DEC 2013
- Manuscript Revised: 16 NOV 2013
- Manuscript Received: 28 JAN 2013
This paper compares alternative models of time-varying volatility on the basis of the accuracy of real-time point and density forecasts of key macroeconomic time series for the USA. We consider Bayesian autoregressive and vector autoregressive models that incorporate some form of time-varying volatility, precisely random walk stochastic volatility, stochastic volatility following a stationary AR process, stochastic volatility coupled with fat tails, GARCH and mixture of innovation models. The results show that the AR and VAR specifications with conventional stochastic volatility dominate other volatility specifications, in terms of point forecasting to some degree and density forecasting to a greater degree. Copyright © 2014 John Wiley & Sons, Ltd.