An Automatic Leading Indicator of Economic Activity: Forecasting GDP growth for European Countries
AbstractIn the construction of a leading indicator model of economic activity, economists must select among a pool of variables which lead output growth. Usually the pool of variables is large, and selection of a subset must be carried out. In this paper we propose an `Automatic Leading Indicator' model. Rather than preselection, we use a dynamic factor model to summarise the information content of a pool of variables. Results show that the forecasting performance of our 'Automatic Leading Indicator' model is significantly better than that of traditional model selection criteria with VAR models. This study is carried out using quaterly data for France, Germany, Italy and the United Kingdom.
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Bibliographic InfoPaper provided by National Institute of Economic and Social Research in its series NIESR Discussion Papers with number 149.
Date of creation: Jun 1999
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- Gonzalo Camba-Mendez & George Kapetanios & Richard J. Smith & Martin R. Weale, 2001. "An automatic leading indicator of economic activity: forecasting GDP growth for European countries," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 37.
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