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Comparison and Pooling of MacroEconomic Forecasts - 2 interesting papers

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Two interesting and related, recently published; papers. I wonder do they reflect a common concern? Driven by "le Crise" are we in Europe beginning to think about examining more closely and thus improving the quality of macroeconomic forecasting.

The most recently published paper is a working paper from the ECB; "OPTIMAL PREDICTION POOLS" by John Geweke and Gianni Amisano. This study considers the properties of weighted linear combinations of n prediction models, or linear pools, evaluated using the conventional log predictive scoring rule. The log score is a concave function of the weights and, in general, an optimal linear combination will include several models with positive weights despite the fact that exactly one model has limiting posterior probability one. It is here;-

 

http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1017.pdf

 

The paper which initially interested me in this sort of thing was published in Autumn last year by the Keil Institute for the World Economy; written by Jonas Dovern and Johannes Weisser, it is entitled; "ASSESSING PROFESSIONAL MACROECONOMIC FORECASTS FROM THE G7-COUNTRIES". The paper uses survey data to analyze the rationality of professional macroeconomic forecasts. The authors analyze both individual forecasts and average forecasts and provide evidence on the properties of forecasts for all the G7-counties and four different macroeconomic variables. They present a modification to the structural model which is commonly used to model the forecast errors of fixed event forecasts in the literature. Results confirm that average forecasts should be used with caution, since even if all individual forecasts are rational the hypothesis of rationality is often rejected by the aggregate forecasts. The paper is here;-

 

http://www.ifw-members.ifw-kiel.de/publications/are-they-really-rational-assessing-professional-macro-economic-forecasts-from-the-g7-countries/KWP_1447.pdf

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