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Combining judgment and models

Research output: Contribution to journalArticle

Original languageEnglish
Pages (from-to)1641-1662
Number of pages22
JournalJournal of Money, Credit and Banking
Volume42
Issue number8
Early online date25 Nov 2010
DOIs
Publication statusPublished - Dec 2010

King's Authors

Abstract

This paper proposes a parsimonious and model-consistent method for combining forecasts generated by structural microfounded models and judgmental forecasts. The method delivers along several dimensions. First, it improves the forecasting performance of the model. Second, it allows interpreting the judgmental forecasts through the lens of the model. Finally, it provides a framework to assess the informational content of the judgmental forecasters. I illustrate the proposed methodology with a real-time forecasting exercise using a simple neo-Keynesian dynamic stochastic general equilibrium model and the Survey of Professional Forecasters.

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