A forecasting performance comparison of dynamic factor models based on static and dynamic methods

Fabio Della Marra

No 2017-ME01, Economics Department Working Papers from Department of Economics, Parma University (Italy)

Abstract: We present a comparison of the forecasting performances of three Dynamic Factor Models on a large monthly data panel of macroeconomic and financial time series for the UE economy. The first model relies on static principal-component and was introduced by Stock and Watson in [1], [2]. The second is based on generalized principal components and it was introduced by Forni, Hallin, Lippi and Reichlin in [3], [4]. The last model has been recently proposed by Forni, Hallin, Lippi and Zaffaroni in [5], [6]. The data panel is split into two parts: the calibration sample, from February 1986 to December 2000, is used to select the most performing specification for each class of models in a in-sample environment, and the proper sample, from January 2001 to November 2015, is used to compare the performances of the selected models in an out-of-sample environment. The metholodogical approach is analogous to [7], but also the size of the rolling window is empirically estimated in the calibration process to achieve more robustness. We find that, on the proper sample, the last model is the most performing for the Inflation. However, mixed evidencies appear over the proper sample for the Industrial Production.

Keywords: Macroeconomic Forecasting; Dynamic Factor Models; Time-domain methods; Frequency-domain methods (search for similar items in EconPapers)
JEL-codes: C0 C01 E01 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2017
New Economics Papers: this item is included in nep-ets and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.swrwebeco.unipr.it/RePEc/pdf/IV_2017-01.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:par:dipeco:2017-me01

Access Statistics for this paper

More papers in Economics Department Working Papers from Department of Economics, Parma University (Italy) Via J.F. Kennedy 6, 43100 PARMA (Italy). Contact information at EDIRC.
Bibliographic data for series maintained by Andrea Lasagni ().