Journal
EUROPEAN ECONOMIC REVIEW
Volume 47, Issue 1, Pages 1-18Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/S0014-2921(02)00206-4
Keywords
forecasting; aggregation; factor models
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This paper compares several time series methods for short-run forecasting of Euro-wide inflation and real activity using data from 1982 to 1997. Forecasts are constructed from univariate autoregressions, vector autoregressions, single equation models that include Euro-wide and US aggregates, and large-model methods in which forecasts are based on estimates of common dynamic factors. Aggregate Euro-wide forecasts are constructed from models that utilize only aggregate Euro-wide variables and by aggregating country-specific models. The,results suggest that forecasts constructed by aggregating the country-specific models are more accurate than forecasts constructed using the aggregate data. (C) 2002 Elsevier Science B.V. All rights reserved.
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