Comparing Alternative Predictors Based on Large‐Panel Factor Models |
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Authors: | Antonello D’ Agostino Domenico Giannone |
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Institution: | 1. European Central Bank, Kaiserstrasse 29, D‐60311 Frankfurt am Main, Germany (e‐mail: antonello.dagostino@ecb.int);2. Université libre de Bruxelles, ECARES CP114, Av. F.D. Roosevelt 50, 1050 Bruxelles,Belgium (e‐mail: dgiannon@ulb.ac.be) |
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Abstract: | This article compares the predictive ability of the factor models of Stock and Watson (2002a) and Forni, Hallin, Lippi and Reichlin (2005) using a ‘large’ panel of macroeconomic variables of the United States. We propose a nesting procedure of comparison that clarifies and partially overturns the results of similar exercises in the literature. Our main conclusion is that with the dataset at hand the two methods have a similar performance and produce highly collinear forecasts. |
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Keywords: | C31 C52 C53 |
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