Information Combination And Forecast (St)Ability Evidence From Vintages Of Time-Series Data
Source: European Central Bank
This paper explores the role of model and vintage combination in forecasting, with a novel approach that exploits the information contained in the revision history of a given variable. The authors analyse the forecast performance of eleven widely used models to predict inflation and GDP growth, in the three dimensions of accuracy, uncertainty and stability by using the real-time data set for macroeconomists developed at the Federal Reserve Bank of Philadelphia. Instead of following the common practice of investigating only the relationship between first available and fully revised data, they analyse the entire revision history for each variable and extract a signal from the entire distribution of vintages of a given variable to improve forecast accuracy and precision.