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Nonlinear Forecasting Using Factor-Augmented Models

✍ Scribed by Bruno Cara Giovannetti

Publisher
John Wiley and Sons
Year
2011
Tongue
English
Weight
98 KB
Volume
32
Category
Article
ISSN
0277-6693

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✦ Synopsis

ABSTRACT

Using factors in forecasting exercises reduces the dimensionality of the covariates set and, therefore, allows the forecaster to explore possible nonlinearities in the model. For an American macroeconomic dataset, I present evidence that the employment of nonlinear estimation methods can improve the out‐of‐sample forecasting accuracy for some macroeconomic variables, such as industrial production, employment, and Fed fund rate. Copyright © 2011 John Wiley & Sons, Ltd.

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