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Sectoral Production and Diffusion Index Forecasts for Output in Lithuania

Author

Listed:
  • Soroosh Soofi-Siavash

    (Bank of Lithuania & Kaunas University of Technology)

  • Kristina Barauskaite

    (Bank of Lithuania & ISM University of Management and Economics)

Abstract

In this paper, we develop and describe quarterly data on disaggregated sectors in Lithuania which covers the period 1998-2018. The data is useful for empirical studies requiring panels with a large number of time observations and a large number of cross-sectional units. We follow the NACE2 level of disaggregation in developing our data, thus allowing us to combine the data with world input-output tables which we in turn use to identify the hubs and the main importing and exporting sectors within the economy. The data is then used for forecasting the growth rate of GDP. There is a substantial increase in the degree of covariation among sectoral production growth rates, which is observed using a split sample around 2008. When we apply factor methods, we find that this strong covariation can be explained by a few factors which are closely correlated to the growth of the retail and wholesale sectors. For GDP growth, the forecasts we consider are the diffusion index forecasts produced using a few indexes that summarize sectoral data, and the forecasts produced using the production growth of selected hubs and importing and exporting sectors. We find that the diffusion indexes and the production growth of sectors that make heavy use of imported inputs in their production have interesting forecasting power for the growth rate of GDP in the 2006-2011 and 2012-2018 periods.

Suggested Citation

  • Soroosh Soofi-Siavash & Kristina Barauskaite, 2019. "Sectoral Production and Diffusion Index Forecasts for Output in Lithuania," Bank of Lithuania Discussion Paper Series 12, Bank of Lithuania.
  • Handle: RePEc:lie:dpaper:12
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    factor model; forecasting; input-output linkages; intersectoral networks;
    All these keywords.

    JEL classification:

    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models

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