Macroeconomic Forecasting with Mixed Frequency Data : Forecasting US output growth and inflation.

Abstract

Although many macroeconomic series such as US real output growth are sampled quarterly, many potentially useful predictors are observed at a higher frequency. We look at whether a recently developed mixed data-frequency sampling (MIDAS) approach can improve forecasts of output growth and inflation. We carry out a number of related real-time forecast comparisons using various indicators as explanatory variables. We find that MIDAS model forecasts of output growth are more accurate at horizons less than one quarter using coincident indicators ; that MIDAS models are an effective way of combining information from multiple indicators ; and that the forecast accuracy of the unemployment-rate Phillips curve for inflation is enhanced using the MIDAS approach.Data frequency ; multiple predictors ; combination ; real-time forecasting