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Forecasting world trade: direct versus “bottom-up” approaches

  • Burgert, Matthias
  • Dées, Stéphane

In a globalised world economy, global factors have become increasingly important to explain trade flows at the expense of country-specific determinants. This paper shows empirically the superiority of direct forecasting methods, in which world trade is directly forecasted at the aggregate levels, relative to "bottom-up" approaches, where world trade results from an aggregation of country-specific forecasts. Factor models in particular prove rather accurate, where the factors summarise large-scale datasets relevant in the determination of trade flows. JEL Classification: C53, C32, E37, F17

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Paper provided by European Central Bank in its series Working Paper Series with number 0882.

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Date of creation: Mar 2008
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Handle: RePEc:ecb:ecbwps:20080882
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