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A Dynamic Factor Model for World Trade Growth

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  • Stéphanie Guichard
  • Elena Rusticelli

Abstract

This paper reviews the main monthly indicators that could help forecasting world trade and compares different type of forecasting models using these indicators. In particular it develops dynamic factor models (DFM) which have the advantage of handling larger datasets of information than bridge models and allowing for the inclusion of numerous monthly indicators on a national and world-wide level such as financial indicators, transportation and shipping indices, supply and orders variables and information technology indices. The comparison of the forecasting performance of the DFMs with more traditional bridge equation models as well as autoregressive benchmarking models shows that, the dynamic factor approach seems to perform better, especially when a large set of indicators is used, but also that the marginal gains in adding indicators seems to diminish after a certain stage. Un modèle à facteurs dynamiques pour prévoir la croissance du commerce mondial Ce document passe en revue les principaux indicateurs mensuels pouvant aider á prévoir le commerce mondial et compare différents types de modèles de prévision utilisant ces indicateurs. En particulier, il développe des modèles á facteurs dynamiques (DFM) qui ont l'avantage de permettre l’utilisation de plus de séries que les modèles d’étalonnage et donc d’inclure des indicateurs mensuels au niveau national et mondial tels que les indicateurs financiers, de transport et d’expédition, d’approvisionnement et de carnets de commandes ou encore et de technologie de l’information. La comparaison de la performance de prévision des DFM avec des modèles d’étalonnage plus traditionnels ou des modèles autoregressifs montre que l'approche en facteurs dynamiques semble plus performante, surtout quand un vaste ensemble d'indicateurs est utilisé ; les gains marginaux en ajoutant des indicateurs semblent toutefois diminuer après un certain stade.

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 874.

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Date of creation: 31 May 2011
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Handle: RePEc:oec:ecoaaa:874-en

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Keywords: world trade; dynamic factor models; forecasting; bridge models; modèle d’étalonnage; prévisions; Commerce mondial; modèles á facteurs dynamiques;

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References

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  1. Baffigi, Alberto & Golinelli, Roberto & Parigi, Giuseppe, 2004. "Bridge models to forecast the euro area GDP," International Journal of Forecasting, Elsevier, Elsevier, vol. 20(3), pages 447-460.
  2. Bańbura, Marta & Modugno, Michele, 2010. "Maximum likelihood estimation of factor models on data sets with arbitrary pattern of missing data," Working Paper Series, European Central Bank 1189, European Central Bank.
  3. Maximo Camacho & Gabriel Perez-Quiros, 2008. "Introducing the EURO-STING: Short Term INdicator of Euro Area Growth," Banco de Espa�a Working Papers, Banco de Espa�a 0807, Banco de Espa�a.
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  7. Barhoumi, K. & Darné, O. & Ferrara, L., 2009. "Are disaggregate data useful for factor analysis in forecasting French GDP?," Working papers, Banque de France 232, Banque de France.
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  9. Mario Forni & Domenico Giannone & Marco Lippi & Lucrezia Reichlin, 2007. "Opening the Black Box: Structural Factor Models with Large Cross-Sections," Center for Economic Research (RECent), University of Modena and Reggio E., Dept. of Economics 008, University of Modena and Reggio E., Dept. of Economics.
  10. Hendry, David F. & Hubrich, Kirstin, 2006. "Forecasting economic aggregates by disaggregates," Working Paper Series, European Central Bank 0589, European Central Bank.
  11. Nigel Pain & Franck Sédillot, 2005. "Indicator models of real GDP growth in the major OECD economies," OECD Economic Studies, OECD Publishing, OECD Publishing, vol. 2005(1), pages 167-217.
  12. Harvey, David & Leybourne, Stephen & Newbold, Paul, 1997. "Testing the equality of prediction mean squared errors," International Journal of Forecasting, Elsevier, Elsevier, vol. 13(2), pages 281-291, June.
  13. Angelini, Elena & Bańbura, Marta & Rünstler, Gerhard, 2008. "Estimating and forecasting the euro area monthly national accounts from a dynamic factor model," Working Paper Series, European Central Bank 0953, European Central Bank.
  14. Maximo Camacho & Gabriel Perez-Quiros, 2009. "Ñ-STING: España Short Term INdicator of Growth," Banco de Espa�a Working Papers, Banco de Espa�a 0912, Banco de Espa�a.
  15. Calista Cheung & Stéphanie Guichard, 2009. "Understanding the World Trade Collapse," OECD Economics Department Working Papers, OECD Publishing 729, OECD Publishing.
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Cited by:
  1. Myriam Morin & Cyrille Schwellnus, 2014. "An Update of the OECD International Trade Equations," OECD Economics Department Working Papers, OECD Publishing 1129, OECD Publishing.

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