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COMBINING FORECASTS BASED ON ECONOMETRIC MODELS FOR SHORT RUN MACROECONOMIC PREDICTIONS WITH HIGH DEGREE OF ACCURACY

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Author(s): Mihaela BRATU (SIMIONESCU)

Journal: USV Annals of Economics and Public Administration
ISSN 2285-3332

Volume: 12;
Issue: 2(16);
Start page: 245;
Date: 12;
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Keywords: forecasts | accuracy | ARMA models | inflation rate | unemployment rate | interest rate | combined forecasts

ABSTRACT
For a certain macroeconomic variable more predictions based on different methods could be made. Theessential problem is to establish the most accurate forecast, using different indicators. The econometric modeling is oneof the most used forecasting method. A strategy to improve the accuracy of the predictions based on econometric modelis to make combined forecasts. In this paper, for inflation rate, unemployment rate and interest rate were madepredictions based on ARMA procedures, VAR(2) models and models with lagged variables. For all the analyzedvariables in Romania, ARMA models generate more accurate forecasts than VAR(2) models or models with lags. Forinflation and interest rate optimal combination and equal-weights-scheme determined the most accurate predictions,while for unemployment rate ARMA models remain the best forecasting method in terms of accuracy.
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