Predicting GDP growth across different Quantiles Open Access
Wang, Qinwen (Spring 2022)
Abstract
We study the relationship between real GDP growth and economic and financial conditions across different quantiles. To overcome the invalidity of quantile regression models rising from persistent regressors, we apply IVXQR method that handles size distortion while preserving discriminatory powers. Increasingly severe financial conditions are associated with an increase in conditional volatility, indicating that financial conditions are informational for vulnerability predictions. The GDP growth forecast for a tight economy becomes more conservative after addressing the invalidity for QR methods. To compare out of sample forecast performance across models, we define final prediction error (FPE) using the quantile loss comparison. Generalized Random Forest has the best performance among different methods, implying that splitting the data into splitting and estimation sets would help GDP growth forecast.
Table of Contents
1 Introduction 1
2 Data 3
3 Method 4
3.1 QuantileRegression.................................................................. 4
3.2 Methods robust to the existence of persistent regressor .............. 5
3.3 TreeBasedMethods ................................................................... 7
3.3.1 QuantileRegressionForest.................................................... 7
3.3.2 GeneralizedQuantileRandomForest ...................................... 8
4 Results 9
4.1 UnivariateAnalysis.................................................................... 9
4.2 BivariateAnalysis...................................................................... 11
5 Out-of-Sample Prediction 19
5.1 Visualizations........................................................................... 22
6 Data Simulation 27
7 Conclusion 29
References 29
Appendix 31
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