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Forecasting key macroeconomic variables from a large number of predictors: A state space approach

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Author Info
Arvid Raknerud, Terje Skjerpen and Anders Rygh Swensen () (Statistics Norway)

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Abstract

We use state space methods to estimate a large dynamic factor model for the Norwegian economy involving 93 variables for 1978Q2–2005Q4. The model is used to obtain forecasts for 22 key variables that can be derived from the original variables by aggregation. To investigate the potential gain in using such a large information set, we compare the forecasting properties of the dynamic factor model with those of univariate benchmark models. We find that there is an overall gain in using the dynamic factor model, but that the gain is notable only for a few of the key variables.

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File URL: http://www.ssb.no/publikasjoner/DP/pdf/dp504.pdf
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Publisher Info
Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 504.

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Date of creation: May 2007
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Handle: RePEc:ssb:dispap:504

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Related research
Keywords: Dynamic factor model Forecasting State space AR models

Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications

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This page was last updated on 2008-8-14.

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