Dynamic Factor Models in Forecasting Latvia's Gross Domestic Product

Viktors Ajevskis () and Gundars Davidsons
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Gundars Davidsons: Bank of Latvia

No 2008/02, Working Papers from Latvijas Banka

Abstract: The study aims at evaluating how useful the application of models using large panels of data in forecasting Latvia's GDP is. Two factor models have been used: the Stock-Watson factor model and the generalised dynamic factor model. The forecast findings by the two models have been compared with the results obtained by the benchmark autoregressive model. The results suggest that compared with simpler autoregressive models both the Stock-Watson factor model and the generalised dynamic factor model ensure forecast improvement, which, however, has not been statistically significant if statistical tests are used.

Keywords: forecasting; factor models; large cross section (search for similar items in EconPapers)
JEL-codes: C32 C33 E53 (search for similar items in EconPapers)
Date: 2008-04-29
New Economics Papers: this item is included in nep-for and nep-mac
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Citations: View citations in EconPapers (12)

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