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Home > Research > Research Publications Research Update New Titles in the Staff Reports Series Number 1, 2008 Return to index page   Staff Reports home page   Quantitative Methods   No. 317, February 2008 Forecasting Economic and Financial Variables with Global VARs M. Hashem Pesaran, Til Schuermann, and L. Vanessa Smith The authors use a global vector autoregressive (GVAR) model to generate out-of-sample one-quarter- and four-quarters-ahead forecasts of real output, inflation, real equity prices, exchange rates, and interest rates over the period 2004:1-2005:4 for 134 variables from twenty-six regions made up of thirty-three countries covering about 90 percent of world output. The forecasts are compared with typical benchmarks, and the effects of model and estimation uncertainty on forecast outcomes are examined by pooling forecasts obtained from different GVAR models estimated over alternative sample periods. The authors find that ­averaging forecasts across both models and windows makes a significant difference. Indeed, the double-averaged GVAR forecasts performed better than the benchmark forecasts, especially for output, inflation, and real equity prices.