Forecasting economic activity with targeted predictors

Guido Bulligan, Massimiliano Marcellino and Fabrizio Venditti

International Journal of Forecasting, 2015, vol. 31, issue 1, 188-206

Abstract: In this paper we explore the forecasting performances of methods based on a pre-selection of monthly indicators from large panels of time series. After a preliminary data reduction step based on different shrinkage techniques, we compare the accuracy of principal components forecasts with that of parsimonious regressions in which further shrinkage is achieved using the General-To-Specific approach. In an empirical application, we show that the two competing models produce accurate current-quarter forecasts of Italian GDP and of its main demand components, outperforming naïve forecasts and comparing favorably with factor models based on all available information. A robustness check conducted on the GDP growth of the euro area and of its major members confirms these results.

Keywords: Nowcasting; Forecasting; Mixed frequency data; Variable selection; Bridge models; Principal components; Factor models (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0169207014000375
Full text for ScienceDirect subscribers only

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:eee:intfor:v:31:y:2015:i:1:p:188-206

DOI: 10.1016/j.ijforecast.2014.03.004

Access Statistics for this article

International Journal of Forecasting is currently edited by R. J. Hyndman

More articles in International Journal of Forecasting from Elsevier
Bibliographic data for series maintained by Catherine Liu ().