A Dynamic Factor Model for World Trade Growth

Stephanie Guichard and Elena Rusticelli
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Elena Rusticelli: OECD

No 874, OECD Economics Department Working Papers from OECD Publishing

Abstract: This paper reviews the main monthly indicators that could help forecasting world trade and compares different type of forecasting models using these indicators. In particular it develops dynamic factor models (DFM) which have the advantage of handling larger datasets of information than bridge models and allowing for the inclusion of numerous monthly indicators on a national and world-wide level such as financial indicators, transportation and shipping indices, supply and orders variables and information technology indices. The comparison of the forecasting performance of the DFMs with more traditional bridge equation models as well as autoregressive benchmarking models shows that, the dynamic factor approach seems to perform better, especially when a large set of indicators is used, but also that the marginal gains in adding indicators seems to diminish after a certain stage.

Un modèle à facteurs dynamiques pour prévoir la croissance du commerce mondial Ce document passe en revue les principaux indicateurs mensuels pouvant aider á prévoir le commerce mondial et compare différents types de modèles de prévision utilisant ces indicateurs. En particulier, il développe des modèles á facteurs dynamiques (DFM) qui ont l'avantage de permettre l’utilisation de plus de séries que les modèles d’étalonnage et donc d’inclure des indicateurs mensuels au niveau national et mondial tels que les indicateurs financiers, de transport et d’expédition, d’approvisionnement et de carnets de commandes ou encore et de technologie de l’information. La comparaison de la performance de prévision des DFM avec des modèles d’étalonnage plus traditionnels ou des modèles autoregressifs montre que l'approche en facteurs dynamiques semble plus performante, surtout quand un vaste ensemble d'indicateurs est utilisé ; les gains marginaux en ajoutant des indicateurs semblent toutefois diminuer après un certain stade.

Keywords: bridge models; Commerce mondial; dynamic factor models; forecasting; modèle d’étalonnage; modèles á facteurs dynamiques; prévisions; world trade (search for similar items in EconPapers)
JEL-codes: C53 E37 F17 F47 (search for similar items in EconPapers)
Date: 2011-05-31
New Economics Papers: this item is included in nep-cwa, nep-for and nep-int
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:874-en

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