Economics at your fingertips  

Generating short-term forecasts of the Lithuanian GDP using factor models

Julius Stakenas ()
Additional contact information
Julius Stakenas: Bank of Lithuania

No 13, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: This paper focuses on short-term Lithuanian GDP forecasting using a large monthly dataset. The forecasting accuracy of various factor model specifications is assessed using the out-of-sample forecasting exercise. It is argued that factor extraction by using a simple principal components method might lead to a loss of important information related GDP forecasting, therefore, other methods should be also considered. Performance of several factor models, which relate the factor extraction step to GDP forecasting, was tested. The effect of using weighted principal components model, with weights depending on variables’ absolute correlation with GDP, was explored in greater detail. Although factor models performed better than naive benchmark forecast for GDP nowcasting and 1 quarter ahead forecasting, we were unable to set up the ranking among different factor model specifications. We also find that a small scale factor model with 5 variables (which could be regarded as the most important monthly variables for GDP nowcasting) is able to nowcast GDP better than models with a full data set of 52 variables, which might indicate that for the case of the Lithuanian economy, a smaller scale factor models may be more suitable.

Keywords: GDP forecasting; factor models; principal components (search for similar items in EconPapers)
JEL-codes: C22 E37 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2012-06-18
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 (1) Track citations by RSS feed

Downloads: (external link) ... -using-factor-models Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 301 [REDIRECT LOOP] Moved Permanently ( [302 Found]--> [301 Moved Permanently]--> [302 Found]--> [301 Moved Permanently]--> [302 Found]--> [301 Moved Permanently]--> [302 Found]-->

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:

Access Statistics for this paper

More papers in Bank of Lithuania Working Paper Series from Bank of Lithuania Bank of Lithuania Gedimino pr. 6, LT-01103 Vilnius, Lithuania. Contact information at EDIRC.
Bibliographic data for series maintained by Povilas Lastauskas ().

Page updated 2020-02-13
Handle: RePEc:lie:wpaper:13