Forecasting Inflation Using Dynamic Model Averaging

20 Pages Posted: 27 Jul 2012

See all articles by Gary Koop

Gary Koop

University of Strathclyde, Glasgow - Strathclyde Business School - Department of Economics

Dimitris Korobilis

University of Glasgow - Adam Smith Business School

Multiple version iconThere are 2 versions of this paper

Date Written: August 2012

Abstract

We forecast quarterly US inflation based on the generalized Phillips curve using econometric methods that incorporate dynamic model averaging. These methods not only allow for coefficients to change over time, but also allow for the entire forecasting model to change over time. We find that dynamic model averaging leads to substantial forecasting improvements over simple benchmark regressions and more sophisticated approaches such as those using time varying coefficient models. We also provide evidence on which sets of predictors are relevant for forecasting in each period.

Suggested Citation

Koop, Gary and Korobilis, Dimitris, Forecasting Inflation Using Dynamic Model Averaging (August 2012). International Economic Review, Vol. 53, Issue 3, pp. 867-886, 2012. Available at SSRN: https://ssrn.com/abstract=2118392 or http://dx.doi.org/10.1111/j.1468-2354.2012.00704.x

Gary Koop

University of Strathclyde, Glasgow - Strathclyde Business School - Department of Economics ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom

Dimitris Korobilis

University of Glasgow - Adam Smith Business School ( email )

40 University Avenue
Gilbert Scott Building
Glasgow, Scotland G12 8QQ
United Kingdom

HOME PAGE: http://https://sites.google.com/site/dimitriskorobilis/

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