MICA-BBVA: a factor model of economic and financial indicators for short-term GDP forecasting
- 925 Downloads
In this paper we extend the Stock and Watson’s (Leading economic indicators, new approaches and forecasting records, 1991) single-index dynamic factor model in an econometric framework that has the advantage of combining information from real and financial indicators published at different frequencies and delays with respect to the period to which they refer. We find that the common factor reflects the behavior of the Spanish business cycle well. We also show that financial indicators are useful for forecasting output growth, particularly when certain financial variables lead the common factor. Finally, we provide a simulated real-time exercise and prove that the model is a very useful tool for the short-term analysis of the Spanish Economy.
KeywordsBusiness cycles Output growth Short-term forecasting
JEL ClassificationE32 C22 E27
- Alvarez R, Camacho M, Perez Quiros G (2011) Finite sample performance of small versus large scale dynamic factor models. Universidad de Murcia, MimeoGoogle Scholar
- Cuevas A, Quilis E (2009) A factor analysis for the Spanish economy (FASE). Mimemo, Ministerio de Economía y Hacienda, MadridGoogle Scholar
- Diebold F, Mariano R (1995) Comparing predictive accuracy. J Bus Econ Stat 13: 253–263Google Scholar
- Doménech R, Gomez V (2005) Ciclo economico y desempleo estructural en la economia española. Investig Econ 19: 259–288Google Scholar
- Doménech R, Estrada González-Calvet L (2007) Potential growth and business cycle in the Spanish economy: implications for fiscal policy. Mimeo. Universidad de Valencia Working Paper 0705Google Scholar
- Gomez V, Maravall A (1996) Programs TRAMO (Time series Regression with Arima noise, Missing observations, and Outliers) and SEATS (Signal Extraction in Arima Time Series). Instructions for the user. Working paper 9628, Research Department, Banco de EspañaGoogle Scholar
- Herce J (2004) Las fuentes de crecimiento de la economía española entre 1960 y 2003. FEDEA working paperGoogle Scholar
- Proietti T, Moauro F (2006) Dynamic factor analysis with non linear temporal aggregation constraints. Appl Stat 55: 281–300Google Scholar
- Stock J, Watson M (1991) A probability model of the coincident economic indicators. In: Lahiri K, Moore G (eds.) Leading economic indicators, new approaches and forecasting records. Cambridge University Press, CambridgeGoogle Scholar
- Wheelock D, Wohar M (2009) Can the term spread predict output growth and recessions? A survey of the literature. Fed Reserve Bank St. Louis Rev 91: 419–440Google Scholar
This article is published under license to BioMed Central Ltd. Open Access This article is distributed under the terms of the Creative Commons Attribution License which permits any use, distribution and reproduction in any medium, provided the original author(s) and source are credited.