Title: Time-varying mixed frequency forecasting: A real-time experiment
Authors: Stefan Neuwirth - ETH Zurich - KOF Swiss Economic Institute (Switzerland) [presenting]
Abstract: In order to test the usefulness of time-varying parameters when forecasting with mixed-frequency data we compare the forecast performance of bridge equations and unrestriced MIDAS models with constant and time-varying parameters. An out-of-sample forecasting exercise with US real-time data shows that the use of time-varying parameters does not improve forecasts significantly over all vintages. However, since the Great Recession, forecast errors are smaller when forecasting with bridge equations, especially for longer forecast horizons, due to the ability of time-varying parameters to incorporate gradual structural changes faster.