Density forecasting with BVAR models under macroeconomic data uncertainty
Clements, M.
It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing. Abstract/SummaryMacroeconomic data are subject to data revisions. Yet, the usual way of generating real-time density forecasts from BVAR models makes no allowance for data uncertainty from future data revisions. We develop methods of allowing for data uncertainty when forecasting with BVAR models with stochastic volatility. Firstly, the BVAR forecasting model is estimated on real-time vintages. Secondly, the BVAR model is jointly estimated with a model of data revisions such that forecasts are conditioned on estimates of the 'true' values. We find that this second method generally improves upon conventional practice for density forecasting, for the US.
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