From Fixed-Event to Fixed-Horizon Density Forecasts: Obtaining Measures of Multi-Horizon Uncertainty From Survey Density Forecasts

53 Pages Posted: 10 Jan 2020

See all articles by Gergely Ganics

Gergely Ganics

Banco de España

Barbara Rossi

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Barcelona Graduate School of Economics

Tatevik Sekhposyan

Texas A&M University - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: January 8, 2020

Abstract

Surveys of Professional Forecasters produce precise and timely point forecasts for key macroeconomic variables. However, the accompanying density forecasts are not as widely utilized, and there is no consensus about their quality. This is partly because such surveys are often conducted for “fixed events”. For example, in each quarter panelists are asked to forecast output growth and inflation for the current calendar year and the next, implying that the forecast horizon changes with each survey round. The fixed-event nature limits the usefulness of survey density predictions for policymakers and market participants, who often wish to characterize uncertainty a fixed number of periods ahead (“fixed-horizon”). Is it possible to obtain fixed-horizon density forecasts using the available fixed-event ones? We propose a density combination approach that weights fixed-event density forecasts according to a uniformity of the probability integral transform criterion, aiming at obtaining a correctly calibrated fixed-horizon density forecast. Using data from the US Survey of Professional Forecasters, we show that our combination method produces competitive density forecasts relative to widely used alternatives based on historical forecast errors or Bayesian VARs. Thus, our proposed fixed-horizon predictive densities are a new and useful tool for researchers and policy makers.

Keywords: Survey of Professional Forecasters, density forecasts, forecast combination, predictive density, probability integral transform, uncertainty, real-time

JEL Classification: C13, C32, C53

Suggested Citation

Ganics, Gergely and Rossi, Barbara and Sekhposyan, Tatevik, From Fixed-Event to Fixed-Horizon Density Forecasts: Obtaining Measures of Multi-Horizon Uncertainty From Survey Density Forecasts (January 8, 2020). Banco de Espana Working Paper No. 1947, Available at SSRN: https://ssrn.com/abstract=3515958 or http://dx.doi.org/10.2139/ssrn.3515958

Gergely Ganics (Contact Author)

Banco de España ( email )

Calle Alcala 48
Madrid 28014
Spain

HOME PAGE: http://https://sites.google.com/view/gergelyganics/home

Barbara Rossi

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Barcelona Graduate School of Economics ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Tatevik Sekhposyan

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

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