Description:
In this paper, we apply Bayesian averaging of classical estimates (BACE) and Bayesian model averaging (BMA) as an automatic modeling procedures for two well-known macroeconometric models: UK demand for narrow money and long-term inflation. Empirical results verify the correctness of BACE and BMA selection and exhibit similar or better forecasting performance compared with a non-pooling approach. As a benchmark, we use Autometrics-an algorithm for automatic model selection. Our study is implemented in the easy-to-use gretl packages, which support parallel processing, automates numerical calculations, and allows for efficient computations.