Working Paper

Model Pooling and Changes in the Informational Content of Predictors: an Empirical Investigation for the Euro Area

Kiel Working Papers, 1982

I study the performance of single predictor bridge equation models as well as a

wide range of model selection and pooling techniques, including Mallows model

averaging and Cross-Validation model averaging, for short-term forecasting euro

area GDP growth. I explore to what extent model selection and model pooling

techniques are able to outperform a simple autoregressive benchmark model in

the periods before, during and after the Great Recession. I find that single predictor

bridge equation models suffer a great variation in the forecast performance

relative to the benchmark model over the analysed sub-samples. Moreover, model

selection techniques turn out to produce quite poor forecasts in some sub-samples.

On the contrary, model pooling based on the Cross-Validation and the Mallows

criterion provide a very stable and accurate forecast performance.