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Nowcasting with Mixed Frequency Data Using Gaussian Processes

Econometrics 2024-09-11 v2 Machine Learning

Abstract

We develop Bayesian machine learning methods for mixed data sampling (MIDAS) regressions. This involves handling frequency mismatches and specifying functional relationships between many predictors and the dependent variable. We use Gaussian processes (GPs) and compress the input space with structured and unstructured MIDAS variants. This yields several versions of GP-MIDAS with distinct properties and implications, which we evaluate in short-horizon now- and forecasting exercises with both simulated data and data on quarterly US output growth and inflation in the GDP deflator. It turns out that our proposed framework leverages macroeconomic Big Data in a computationally efficient way and offers gains in predictive accuracy compared to other machine learning approaches along several dimensions.

Keywords

Cite

@article{arxiv.2402.10574,
  title  = {Nowcasting with Mixed Frequency Data Using Gaussian Processes},
  author = {Niko Hauzenberger and Massimiliano Marcellino and Michael Pfarrhofer and Anna Stelzer},
  journal= {arXiv preprint arXiv:2402.10574},
  year   = {2024}
}

Comments

Keywords: prediction, MIDAS, machine learning, Bayesian additive regression trees; JEL: C11, C22, C53, E31, E37