Forecasting economic growth for Estonia: application of common factor methodologies

Christian Henning Schulz ()

No 2007-09, Bank of Estonia Working Papers from Bank of Estonia

Abstract: In this paper, the application of two different unobserved factor models to a data set from Estonia is presented. The small-scale state-space model used by Stock and Watson (1991) and the large-scale static principal components model used by Stock and Watson (2002) are employed to derive common factors. Subsequently, using these common factors, forecasts of real economic growth for Estonia are performed and evaluated against benchmark models for different estimation and forecasting periods. Results show that both methods show improvements over the benchmark model, but not for the all the forecasting periods

Keywords: Estonia; forecasting; principal components; state-space model; forecast perfomance (search for similar items in EconPapers)
JEL-codes: C53 C22 C32 F43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-for
Date: 2007-09-04, Revised 2007-09-04
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