Short-term forecasts of French GDP: a dynamic factor model with targeted predictors

Marie Bessec

Working papers from Banque de France

Abstract: In recent years, factor models have received increasing attention from both econometricians and practitioners in the forecasting of macroeconomic variables. In this context, Bai and Ng (2008) find an improvement in selecting indicators according to the forecast variable prior to factor estimation (targeted predictors). In particular, they propose using the LARS-EN algorithm to remove irrelevant predictors. In this paper, we adapt the Bai and Ng procedure to a setup in which data releases are delayed and staggered. In the pre-selection step, we replace actual data with estimates obtained on the basis of past information, where the structure of the available information replicates the one a forecaster would face in real time. We estimate on the reduced dataset the dynamic factor model of Giannone, Reichlin and Small (2008) and Doz, Giannone and Reichlin (2011), which is particularly suitable for the very short-term forecast of GDP. A pseudo real-time evaluation on French data shows the potential of our approach.

Keywords: GDP forecasting; factor models; variable selection; targeted predictors. (search for similar items in EconPapers)
JEL-codes: C22 E32 E37 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012
New Economics Papers: this item is included in nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://publications.banque-france.fr/sites/defaul ... g-paper_409_2012.pdf (application/pdf)

Related works:
Journal Article: Short‐Term Forecasts of French GDP: A Dynamic Factor Model with Targeted Predictors (2013)
Working Paper: Short-term forecasts of French GDP: A dynamic factor model with targeted predictors (2013)
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:bfr:banfra:409

Access Statistics for this paper

More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart (michael.brassart@banque-france.fr).