The combination of macroeconomic forecasts

Abstract

Abstract The paper examines combined forecasts based on two components: forecasts produced by Chase Econometrics and those produced using the Box‐Jenkins ARIMA technique. Six series of quarterly ex ante and simulated ex ante forecasts are used over 37 time periods and ten horizons. The forecasts are combined using seven different methods. The best combined forecasts, judged by average relative root‐mean‐square error, are superior to the Chase forecasts for three variables and inferior for two, though averaged over all six variables the Chase forecasts are slightly better. A two‐step procedure produces forecasts for the last half of the sample which, on average, are slightly better than the Chase forecasts.