Forecasting with FAVAR: macroeconomic versus financial factors

Alessia Paccagnini

No 256, NBP Working Papers from Narodowy Bank Polski

Abstract: We assess the predictive power of macroeconomic and financial latent factors on the key variables for the US economy before and after the recent Great Recession. We implement a forecasting horserace among Factor Augmented VAR (FAVAR), Classical, and Bayesian VAR models. FAVAR models outperform others. Focusing only on macroeconomic or on nancial latent factors,we nd how the nancial variables have not a driver role in forecasting the US economy including the Great Recession.

Keywords: Factor Models; Factor Augmented VAR; VAR models; Bayesian VAR models; Forecasting (search for similar items in EconPapers)
JEL-codes: C3 C38 C53 E3 E32 (search for similar items in EconPapers)
Pages: 38
Date: 2017
New Economics Papers: this item is included in nep-for and nep-mac
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:256

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