Model Switching and Model Averaging in Time-Varying Parameter Regression Models

Miguel Angel Gonzalez Belmonte and Gary Koop

No 1302, Working Papers from University of Strathclyde Business School, Department of Economics

Abstract: This paper investigates the usefulness of switching Gaussian state space models as a tool for implementing dynamic model selecting (DMS) or averaging (DMA)in time-varying parameter regression models. DMS methods allow for model switching, where a different model can be chosen at each point in time. Thus, they allow for the explanatory variables in the time-varying parameter regression model to change over time. DMA will carry out model averaging in a time-varying manner. We compare our exact approach to DMA/DMS to a popular existing procedure which relies on the use of forgetting factor approximations. In an application, we use DMS to select different predictors in an in‡ation forecasting application. We also compare different ways of implementing DMA/DMS and investigate whether they lead to similar results.

Keywords: Model switching; forecast combination; switching state space model; infl‡ation forecasting (search for similar items in EconPapers)
JEL-codes: C11 C52 E37 E47 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2013-01
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Published

Downloads: (external link)
http://www.strath.ac.uk/media/1newwebsite/departme ... /2013/13-02FINAL.pdf (application/pdf)

Related works:
Chapter: Model Switching and Model Averaging in Time-Varying Parameter Regression Models (2014)
Working Paper: Model Switching and Model Averaging in Time- Varying Parameter Regression Models (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:str:wpaper:1302

Access Statistics for this paper

More papers in Working Papers from University of Strathclyde Business School, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Kirsty Hall ().