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A DYNAMIC FACTOR MODEL FOR THE COLOMBIAN INFLATION

Eliana González-Molano, Luis Melo-Velandia (), Viviana Monroy Mejía () and Brayan Rojas ()

BORRADORES DE ECONOMIA from BANCO DE LA REPÚBLICA

Abstract: ABSTRACT. We use a dynamic factor model proposed by Stock and Watson [1998, 1999,2002a,b] to forecast Colombian inflation. The model includes 92 monthly series observedover the period 1999:01-2008:06. The results show that for short-run horizons, factor modelforecasts significantly outperformed the auto-regressive benchmark model in terms of theroot mean squared forecast error statistic.

Keywords: Dynamic factor models; static factor models; forecast accuracy. (search for similar items in EconPapers)
JEL-codes: C13 C33 C53 (search for similar items in EconPapers)
Pages: 87
Date: 2009-02-09
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
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Working Paper: A Dynamic Factor Model for the Colombian Inflation (2009) Downloads
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