Forecasting Euro Area Real GDP: Optimal Pooling of Information
This paper proposes a new method of forecasting euro area quarterly real GDP that uses area-wide indicators, which are derived by optimally pooling the information contained in national indicator series. Following the ideas of predictive modeling, we construct the area-wide indicators by utilizing weights that minimize the variance of the out-of-sample forecast errors of the area-wide target variable. In an out-of-sample forecast experiment we find that our optimal pooling of information approach outperforms alternative forecasting methods in terms of forecast accuracy.
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- Marcellino, Massimiliano & Stock, James H. & Watson, Mark W., 2003.
"Macroeconomic forecasting in the Euro area: Country specific versus area-wide information,"
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- Banerjee, Anindya & Marcellino, Massimiliano & Masten, Igor, 2003.
"Leading Indicators for Euro Area Inflation and GDP Growth,"
CEPR Discussion Papers
3893, C.E.P.R. Discussion Papers.
- Anindya Banerjee & Massimiliano Marcellino & Igor Masten, 2005. "Leading Indicators for Euro-area Inflation and GDP Growth," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(s1), pages 785-813, December.
- Anindya Banerjee & Massimiliano Marcellino & Igor Masten, 2003. "Leading Indicators for Euro-area Inflation and GDP Growth," Working Papers 235, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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"Sparse and Stable Markowitz Portfolios,"
CEPR Discussion Papers
6474, C.E.P.R. Discussion Papers.
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- George Kapetanios & Massimiliano Marcellino, 2009.
"A parametric estimation method for dynamic factor models of large dimensions,"
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- Kapetanios, George & Marcellino, Massimiliano, 2006. "A Parametric Estimation Method for Dynamic Factor Models of Large Dimensions," CEPR Discussion Papers 5620, C.E.P.R. Discussion Papers.
- Harvey, David & Leybourne, Stephen & Newbold, Paul, 1997. "Testing the equality of prediction mean squared errors," International Journal of Forecasting, Elsevier, vol. 13(2), pages 281-291, June.
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