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Non-linear relation between industrial production and business surveys data

  • Giancarlo Bruno

    (ISAE - Institute for Studies and Economic Analyses)

In this paper I compare different models, a linear and a non-linear one, for forecasting industrial production by means of some related indicators. I claim that the difficulties associated with the correct identification of a non-linear model could be a possible cause of the often observed worse performance of non-linear models with respect to linear ones observed in the empirical literature. To cope with this issue I use a non-linear non-parametric model. The results are promising, as the forecasting performance shows a clear improvement over the linear parametric model.

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File URL: http://lipari.istat.it/digibib/Working_Papers/WP_119_2009_Bruno.pdf
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Paper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 119.

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Length: 27 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:isa:wpaper:119
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  1. Robalo Marques, Carlos, 2004. "Inflation persistence: facts or artefacts?," Working Paper Series 0371, European Central Bank.
  2. Harvill, Jane L. & Ray, Bonnie K., 2005. "A note on multi-step forecasting with functional coefficient autoregressive models," International Journal of Forecasting, Elsevier, vol. 21(4), pages 717-727.
  3. Jagric Timotej, 2003. "A Nonlinear Approach to Forecasting with Leading Economic Indicators," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 7(2), pages 1-20, July.
  4. Bruno, Giancarlo & Lupi, Claudio, 2003. "Forecasting Industrial Production and the Early Detection of Turning Points," Economics & Statistics Discussion Papers esdp03004, University of Molise, Dept. EGSeI.
  5. Tommaso Proietti & Cecilia Frale, 2007. "New proposals for the quantification of qualitative survey data," CEIS Research Paper 98, Tor Vergata University, CEIS.
  6. D R Osborn & A Matas-Mir, 2003. "The Extent of Seasonal/Business Cycle Interactions in European Industrial Production," Centre for Growth and Business Cycle Research Discussion Paper Series 38, Economics, The Univeristy of Manchester.
  7. Franses, Philip Hans & van Dijk, Dick, 2005. "The forecasting performance of various models for seasonality and nonlinearity for quarterly industrial production," International Journal of Forecasting, Elsevier, vol. 21(1), pages 87-102.
  8. Francis X. Diebold & Robert S. Mariano, 1994. "Comparing Predictive Accuracy," NBER Technical Working Papers 0169, National Bureau of Economic Research, Inc.
  9. Bradley, Michael D. & Jansen, Dennis W., 2004. "Forecasting with a nonlinear dynamic model of stock returns and industrial production," International Journal of Forecasting, Elsevier, vol. 20(2), pages 321-342.
  10. Siliverstovs, B. & van Dijk, D.J.C., 2003. "Forecasting industrial production with linear, nonlinear, and structural change models," Econometric Institute Research Papers EI 2003-16, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  11. Ioannis A. Venetis & David A. Peel & Ivan Paya, 2004. "Asymmetry in the link between the yield spread and industrial production: threshold effects and forecasting," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(5), pages 373-384.
  12. Jianqing Fan, 2000. "Simultaneous Confidence Bands and Hypothesis Testing in Varying-coefficient Models," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 27(4), pages 715-731.
  13. Garcia-Ferrer, Antonio & Bujosa-Brun, Marcos, 2000. "Forecasting OECD industrial turning points using unobserved components models with business survey data," International Journal of Forecasting, Elsevier, vol. 16(2), pages 207-227.
  14. Harvey, David I & Leybourne, Stephen J & Newbold, Paul, 1998. "Tests for Forecast Encompassing," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 254-59, April.
  15. Simpson, Paul W & Osborn, Denise R & Sensier, Marianne, 2001. "Forecasting UK Industrial Production over the Business Cycle," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 20(6), pages 405-24, September.
  16. Öcal Nadir, 2000. "Nonlinear Models for U.K. Macroeconomic Time Series," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 4(3), pages 1-15, October.
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