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Title: BVAR forecasts, survey information and structural change in the Euro area Authors:  Florens Odendahl - Banque de France (France) [presenting]
Abstract: External information extracted from the European Central Banks Survey of Professional Forecasters is incorporated into the predictions of a Bayesian VAR, using entropic tilting and soft conditioning. Both methods significantly improve the plain BVAR point and density forecasts. Importantly, we do not restrict the forecasts at a specific quarterly horizon, but their possible paths over several horizons jointly, as the survey information comes in the form of one- and two-year-ahead expectations. Besides improving the accuracy of the variable that we target, the spillover effects to other-than-targeted variables are relevant in size and statistically significant. We document that the baseline BVAR exhibits an upward bias for GDP growth after the financial crisis and our results provide evidence that survey forecasts can help mitigate the effects of structural breaks on the forecasting performance of a popular macroeconometric model.