Forecasting with a Panel Tobit Model

58 Pages Posted: 3 Jan 2020

See all articles by Laura Liu

Laura Liu

Indiana University Bloomington - Department of Economics

Hyungsik Roger Moon

University of Southern California - Department of Economics; USC Dornsife Institute for New Economic Thinking

Frank Schorfheide

University of Pennsylvania - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: December 10, 2019

Abstract

We use a dynamic panel Tobit model with heteroskedasticity to generate point, set, and density forecasts for a large cross-section of short time series of censored observations. Our fully Bayesian approach allows us to flexibly estimate the cross-sectional distribution of heterogeneous coefficients and then implicitly use this distribution as prior to construct Bayes forecasts for the individual time series. We construct set forecasts that explicitly target the average coverage probability for the cross-section. We present a novel application in which we forecast bank-level charge-off rates for credit card and residential real estate loans, comparing various versions of the panel Tobit model.

Keywords: Bayesian Inference, Density Forecasts, Interval Forecasts, Loan Charge-Offs, Panel Data, Point Forecasts, Set Forecasts, Tobit Model

JEL Classification: C11, C14, C23, C53, G21

Suggested Citation

Liu, Laura and Moon, Hyungsik Roger and Schorfheide, Frank, Forecasting with a Panel Tobit Model (December 10, 2019). Available at SSRN: https://ssrn.com/abstract=3502279 or http://dx.doi.org/10.2139/ssrn.3502279

Laura Liu (Contact Author)

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

HOME PAGE: http://https://laurayuliu.com/

Hyungsik Roger Moon

University of Southern California - Department of Economics ( email )

KAP 300
Los Angeles, CA 90089-0253
United States
213-740-2108 (Phone)
213-740-8543 (Fax)

USC Dornsife Institute for New Economic Thinking ( email )

3620 S. Vermont Avenue, KAP 364F
Los Angeles, CA 90089-0253
United States

Frank Schorfheide

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

HOME PAGE: http://www.econ.upenn.edu/~schorf

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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