Chapter 4 Forecasting Macroeconomic Variables Using Diffusion Indexes in Short Samples with Structural Change

Anindya Banerjee, Massimiliano Marcellino and Igor Masten

A chapter in Forecasting in the Presence of Structural Breaks and Model Uncertainty, 2008, pp 149-194 from Emerald Group Publishing Limited

Abstract: We conduct a detailed simulation study of the forecasting performance of diffusion index-based methods in short samples with structural change. We consider several data generation processes, to mimic different types of structural change, and compare the relative forecasting performance of factor models and more traditional time series methods. We find that changes in the loading structure of the factors into the variables of interest are extremely important in determining the performance of factor models. We complement the analysis with an empirical evaluation of forecasts for the key macroeconomic variables of the Euro area and Slovenia, for which relatively short samples are officially available and structural changes are likely. The results are coherent with the findings of the simulation exercise and confirm the relatively good performance of factor-based forecasts in short samples with structural change.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.101 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.101 ... 1574-8715(07)00204-7
https://www.emerald.com/insight/content/doi/10.101 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

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:eme:fegzzz:s1574-8715(07)00204-7

DOI: 10.1016/S1574-8715(07)00204-7

Access Statistics for this chapter

More chapters in Frontiers of Economics and Globalization from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().