Open access
Date
2015-04Type
- Working Paper
ETH Bibliography
yes
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Abstract
This paper presents a MIDAS type mixed frequency VAR forecasting model. First, we propose a general and compact mixed frequency VAR framework using a stacked vector approach. Second, we integrate the mixed frequency VAR with a MIDAS type Almon lag polynomial scheme which is designed to reduce the parameter space while keeping models flexible. We show how to recast the resulting non-linear MIDAS type mixed frequency VAR into a linear equation system that can be easily estimated. A pseudo out-of-sample forecasting exercise with US real-time data yields that mixed frequency VAR substantially improves predictive accuracy upon a standard VAR for different VAR specifications. Forecast errors for, e.g., GDP growth decrease by 30 to 60 percent for forecast horizons up to six months and by around 20 percent for a forecast horizon of one year. Show more
Permanent link
https://doi.org/10.3929/ethz-a-010414894Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
Mixed frequency data; Real time; VAR; WIRTSCHAFTSPROGNOSEN; Forecasting; ECONOMIC FORECASTS; MIDASOrganisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
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ETH Bibliography
yes
Altmetrics