This paper presents a new forecasting approach straddling the conventional methods applied to the Italian industrial production index. Specifically, the proposedmethod treats factormodels and bridge models as complementary ingredients feeding a unique model specification. We document that the proposed approach improves upon traditional bridge models bymaking efficient use of the information conveyed by a large amount of survey data onmanufacturing activity. Different factor algorithms are compared and, under the provision that a large estimation window is used, partial least squares outperform principal component-based alternatives.
Factor augmented bridge models (FABM) and soft indicators to forecast italian industrial production / Girardi, Alessandro; Guardabascio, Barbara; Ventura, Marco. - In: JOURNAL OF FORECASTING. - ISSN 0277-6693. - 35:(2016), pp. 542-552. [10.1002/for.2393]
Factor augmented bridge models (FABM) and soft indicators to forecast italian industrial production
Girardi, Alessandro;Ventura, Marco
2016
Abstract
This paper presents a new forecasting approach straddling the conventional methods applied to the Italian industrial production index. Specifically, the proposedmethod treats factormodels and bridge models as complementary ingredients feeding a unique model specification. We document that the proposed approach improves upon traditional bridge models bymaking efficient use of the information conveyed by a large amount of survey data onmanufacturing activity. Different factor algorithms are compared and, under the provision that a large estimation window is used, partial least squares outperform principal component-based alternatives.File | Dimensione | Formato | |
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