Forecasting with Dynamic Models using Shrinkage-based Estimation
Andrea Carriero (),
George Kapetanios and
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George Kapetanios: Queen Mary, University of London
No 635, Working Papers from Queen Mary University of London, School of Economics and Finance
The paper provides a proof of consistency of the ridge estimator for regressions where the number of regressors tends to infinity. Such result is obtained without assuming a factor structure. A Monte Carlo study suggests that shrinkage autoregressive models can lead to very substantial advantages compared to standard autoregressive models. An empirical application focusing on forecasting inflation and GDP growth in a panel of countries confirms this finding.
Keywords: Shrinkage; Forecasting (search for similar items in EconPapers)
JEL-codes: C13 C22 C53 (search for similar items in EconPapers)
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Working Paper: Forecasting with Dynamic Models using Shrinkage-based Estimation (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:635
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