Boosting nonlinear predictability of macroeconomic time series

Abstract

<p>We apply the boosting estimation method in order to investigate to what extent and at what horizons macroeconomic time series have nonlinear predictability that comes from their own history. Our results indicate that the U.S. macroeconomic time series have more exploitable nonlinear predictability than previous studies have found. On average, the most favorable out-of-sample performance is obtained via a two-stage procedure, where a conventional linear prediction model is fitted first and the boosting technique is applied to build a nonlinear model for its residuals.<br></p>