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

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

Research output: Contribution to journalArticle

158 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 languageEnglish (US)
Pages (from-to)1-18
Number of pages18
JournalEuropean Economic Review
Volume47
Issue number1
DOIs
StatePublished - Feb 1 2003

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • Aggregation
  • Factor models
  • Forecasting

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