MICA-BBVA. A Factor Model of Economic and Financial Indicators for Short-term GDP Forecasting
AbstractIn this paper we extend the Stock and Watsonâ€™s (1991) single-index dynamic factor model in an econometric framework that has the advantage of combining information from real and financial indicators published at different frequencies and delays with respect to the period to which they refer. We find that the common factor reflects the behavior of the Spanish business cycle well and helps to estimate with high precision the regime-switching probabilities in line with business cycle phases. We also show that financial indicators are useful for forecasting output growth, particularly when certain financial variables lead the common factor. Finally, we provide a simulated real-time exercise and prove that the model is a very useful tool for the short-term analysis of the Spanish Economy.
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Bibliographic InfoPaper provided by BBVA Bank, Economic Research Department in its series Working Papers with number 1021.
Length: 21 pages
Date of creation: Aug 2010
Date of revision:
dynamic factor model; GDP forecast; financial variables.;
Other versions of this item:
- Máximo Camacho & Rafael Doménech, 2012. "MICA-BBVA: a factor model of economic and financial indicators for short-term GDP forecasting," SERIEs, Spanish Economic Association, vol. 3(4), pages 475-497, December.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E27 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-16 (All new papers)
- NEP-FOR-2010-10-16 (Forecasting)
- NEP-MAC-2010-10-16 (Macroeconomics)
You can help add them by filling out this form.
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