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Abstract Recent work suggests VAR models of output, inflation, and interest rates may be prone to instabilities. In the face of such instabilities, a variety of estimation or forecasting methods might be used to improve the accuracy of forecasts from a VAR. The uncertainty inherent in any single representation of instability could mean that combining forecasts from a range of approaches will improve forecast accuracy. Focusing on models of US output, prices, and interest rates, this paper examines the effectiveness of combining various models of instability in improving VAR forecasts made with real‐time data. Copyright © 2009 John Wiley & Sons, Ltd.
Clark et al. (Fri,) studied this question.