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Factor model forecasts for New Zealand

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Abstract

This paper focuses on forecasting four key New Zealand macroeconomic variables using a dynamic factor model and a large number of predictors. We compare the (simulated) real-time forecasting performance of the factor model with a variety of other time series models and gauge the sensitivity of our results to alternative variable selection algorithms. We find that the factor model performs particularly well at longer horizons.

Suggested Citation

  • Troy Matheson, 2005. "Factor model forecasts for New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2005/01, Reserve Bank of New Zealand.
    • Handle: RePEc:nzb:nzbdps:2005/01
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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