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Forecasting the World Economy in the Short Term

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  • Audrone Jakaitiene
  • Stephane Dees

Abstract

Forecasting the world economy is a difficult task given the complex interrelationships within and across countries. This paper proposes a number of approaches to forecast short-term changes in selected world economic variables and aims, first, at ranking various forecasting methods in terms of forecast accuracy and, second, at checking whether methods forecasting di- rectly aggregate variables (direct approaches)out-perform methods based on the aggregation of country- specific forecasts (bottom-up approaches). Overall, all methods perform better than a simple benchmark for short horizons (up to three months ahead). Among the forecasting approaches used, factor models appear to perform the best. Moreover, direct approaches out-perform bottom-up ones for real variables, but not for prices. Finally, when country-specific forecasts are adjusted to match direct forecasts at the aggregate levels (top-down approaches), the forecast accuracy is neither improved nor deteriorated (i.e. top-down and bottom-up approaches are broadly equivalent in terms of country-specific forecast accuracy). JEL Classification: C53, C32, E37, F17

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 35 (2012)
Issue (Month): 3 (03)
Pages: 331-350

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Handle: RePEc:bla:worlde:v:35:y:2012:i:3:p:331-350

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Cited by:
  1. Claudia Godbout & Marco J. Lombardi, 2012. "Short-Term Forecasting of the Japanese Economy Using Factor Models," Working Papers, Bank of Canada 12-7, Bank of Canada.
  2. repec:ecb:ecbwps:20111428 is not listed on IDEAS
  3. Roberto Golinelli & Giuseppe Parigi, 2013. "Tracking world trade and GDP in real time," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 920, Bank of Italy, Economic Research and International Relations Area.
  4. Katja Drechsel & S. Giesen & Axel Lindner, 2014. "Outperforming IMF Forecasts by the Use of Leading Indicators," IWH Discussion Papers, Halle Institute for Economic Research 4, Halle Institute for Economic Research.
  5. D’Agostino, Antonello & Schnatz, Bernd, 2012. "Survey-based nowcasting of US growth: a real-time forecast comparison over more than 40 years," Working Paper Series, European Central Bank 1455, European Central Bank.

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