Short-term Forecasting for Empirical Economists: A Survey of the Recently Proposed Algorithms

Maximo Camacho, Gabriel Perez-Quiros and Pilar Poncela
Authors registered in the RePEc Author Service: Gabriel Perez Quiros

Foundations and Trends(R) in Econometrics, 2013, vol. 6, issue 2, 101-161

Abstract: Practitioners do not always use research findings, sometimes because the research is not always conducted in a manner relevant to real-world practice. This survey seeks to close the gap between research and practice on short-term forecasting in real time. Towards this end, we review the most relevant recent contributions to the literature, examine their pros and cons, and we take the liberty of proposing some lines of future research. We include bridge equations, MIDAS, VARs, factor models and Markov-switching factor models, all allowing for mixed-frequency and ragged ends. Using the four constituent monthly series of the Stock–Watson coincident index, industrial production, employment, income and sales, we evaluate their empirical performance to forecast quarterly US GDP growth rates in real time. Finally, we review the main results regarding the number of predictors in factor based forecasts and how the selection of the more informative or representative variables can be made.

Keywords: Business Cycles; Output Growth; Time Series; forecasting. The authors review some of the key theoretical results and empirical findings in the recent literature on short-term forecasting; and translate these findings into economically meaningful techniques to facilitate their widespread application to compute short-term forecasts in economics; and to monitor the ongoing business cycle developments in real time. (search for similar items in EconPapers)
JEL-codes: C22 E27 E32 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (23)

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Working Paper: Short-term forecasting for empirical economists. A survey of the recently proposed algorithms (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:now:fnteco:0800000018

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