Density Forecasts with MIDAS Models

46 Pages Posted: 4 May 2015 Last revised: 28 Nov 2015

See all articles by Knut Aastveit

Knut Aastveit

Norges Bank

Claudia Foroni

Norges Bank

Francesco Ravazzolo

Free University of Bozen-Bolzano - Faculty of Economics and Management; BI Norwegian Business School

Date Written: November 18, 2015

Abstract

In this paper we propose a parametric block wild bootstrap approach to compute density forecasts for various types of mixed-data sampling (MIDAS) regressions. First, Monte Carlo simulations show that predictive densities for the various MIDAS models derived from the block wild bootstrap approach are more accurate, in terms of coverage rates, than predictive densities derived from either a residual-based bootstrap approach or by drawing errors from a normal distribution. This result holds irrespective of the data generating errors being normally independently distributed, serially correlated, heteroskedastic or a mixture of normal distributions. Second, in an empirical exercise we evaluate density forecasts for quarterly U.S. real output growth, exploiting information from typical monthly and weekly series. We show that the block wild bootstrapping approach, applied to the various MIDAS regressions, produces predictive densities for U.S. real output growth that are well-calibrated. Moreover, the relative accuracy, measured in terms of the logarithmic score or the continuous ranked probability score, improves for the various MIDAS specifications as more information becomes available.

Keywords: C11, C53, E37

JEL Classification: Mixed Data Sampling, Density Forecasts, Bootstrapping, Nowcasting

Suggested Citation

Aastveit, Knut and Foroni, Claudia and Ravazzolo, Francesco, Density Forecasts with MIDAS Models (November 18, 2015). Norges Bank Working Paper 10 | 2014. Available at SSRN: https://ssrn.com/abstract=2602400 or http://dx.doi.org/10.2139/ssrn.2602400

Knut Aastveit (Contact Author)

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Claudia Foroni

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Francesco Ravazzolo

Free University of Bozen-Bolzano - Faculty of Economics and Management ( email )

Via Sernesi 1
39100 Bozen-Bolzano (BZ), Bozen 39100
Italy

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

HOME PAGE: http://www.francescoravazzolo.com/

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