Macroeconomic forecasting in the Euro area: Country specific versus area-wide information

Massimiliano Marcellino; James H. Stock; Mark W. Watson

doi:10.1016/S0014-2921(02)00206-4

Macroeconomic forecasting in the Euro area: Country specific versus area-wide information

Massimiliano Marcellino, James H. Stock, Mark W. Watson

Research output: Contribution to journal › Article › peer-review

194 Scopus citations

Abstract

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.

Original language	English (US)
Pages (from-to)	1-18
Number of pages	18
Journal	European Economic Review
Volume	47
Issue number	1
DOIs	https://doi.org/10.1016/S0014-2921(02)00206-4
State	Published - Feb 2003

All Science Journal Classification (ASJC) codes

Finance
Economics and Econometrics

Keywords

Aggregation
Factor models
Forecasting

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10.1016/S0014-2921(02)00206-4

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title = "Macroeconomic forecasting in the Euro area: Country specific versus area-wide information",

abstract = "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.",

keywords = "Aggregation, Factor models, Forecasting",

author = "Massimiliano Marcellino and Stock, {James H.} and Watson, {Mark W.}",

note = "Funding Information: We would like to thank Fabio Canova, Vitor Gaspar, Jordi Gali, Jerome Henry, Ricardo Mestre, Lucrezia Reichlin, two referees, and seminar participants at the European Central Bank, the Bank of England, the Bank of Spain, and at the CEPR-ESSIM Conference (May 2000) for helpful comments on an earlier draft of this paper. This research was supported in part by National Science Foundation grant no. SBR-9730489 and by the Center for European Studies at Harvard University. Copyright: Copyright 2004 Elsevier Science B.V., Amsterdam. All rights reserved.",

year = "2003",

month = feb,

doi = "10.1016/S0014-2921(02)00206-4",

language = "English (US)",

volume = "47",

pages = "1--18",

journal = "European Economic Review",

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T2 - Country specific versus area-wide information

AU - Marcellino, Massimiliano

AU - Stock, James H.

AU - Watson, Mark W.

N1 - Funding Information: We would like to thank Fabio Canova, Vitor Gaspar, Jordi Gali, Jerome Henry, Ricardo Mestre, Lucrezia Reichlin, two referees, and seminar participants at the European Central Bank, the Bank of England, the Bank of Spain, and at the CEPR-ESSIM Conference (May 2000) for helpful comments on an earlier draft of this paper. This research was supported in part by National Science Foundation grant no. SBR-9730489 and by the Center for European Studies at Harvard University. Copyright: Copyright 2004 Elsevier Science B.V., Amsterdam. All rights reserved.

PY - 2003/2

Y1 - 2003/2

N2 - 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.

AB - 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.

KW - Aggregation

KW - Factor models

KW - Forecasting

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JO - European Economic Review

JF - European Economic Review

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Macroeconomic forecasting in the Euro area: Country specific versus area-wide information

Abstract

All Science Journal Classification (ASJC) codes

Keywords

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