Forecasting inflation using dynamic model averaging

We forecast quarterly US inflation based on the generalized Phillips curve using econometric methods that incorporate dynamic model averaging. These methods not only allow for coefficients to change over time, but also allow for the entire forecasting model to change over time. We find that dynamic model averaging leads to substantial forecasting improvements over simple benchmark regressions and more sophisticated approaches such as those using time varying coefficient models. We also provide evidence on which sets of predictors are relevant for forecasting in each period.