Forecasting Economic Aggregates by Disaggregates

David F. Hendry () and Kirstin Hubrich ()

No 5485, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We explore whether forecasting an aggregate variable using information on its disaggregate components can improve the prediction mean squared error over first forecasting the disaggregates and then aggregating those forecasts, or, alternatively, over using only lagged aggregate information in forecasting the aggregate. We show theoretically that the first method of forecasting the aggregate should outperform the alternative methods in population. We investigate whether this theoretical prediction can explain our empirical findings and analyse why forecasting the aggregate using information on its disaggregate components improves forecast accuracy of the aggregate forecast of euro area and US inflation in some situations, but not in others.

Keywords: disaggregate information; factor models; forecast model selection; predictability; VAR (search for similar items in EconPapers)
JEL-codes: C51 C53 E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for and nep-mac
Date: 2006-01
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (23) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/pubs/dps/DP5485.asp (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Forecasting economic aggregates by disaggregates (2006)
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: http://EconPapers.repec.org/RePEc:cpr:ceprdp:5485

Ordering information: This working paper can be ordered from
http://www.cepr.org/pubs/dps/DP5485.asp

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers
Address: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Series data maintained by ().