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http://ssrn.com/abstract=711161
 
 

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Forecasting Macroeconomic Variables for the New Member States of the European Union


Anindya Banerjee


European University Institute - Department of Economics; University of Oxford - Department of Economics

Massimiliano Giuseppe Marcellino


European University Institute; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR)

Igor Masten


University of Ljubljana - Faculty of Economics

May 2005

ECB Working Paper No. 482

Abstract:     
The accession of ten countries into the European Union makes the forecasting of their key macroeconomic indicators an exercise of some importance. Because of the transition period, only short spans of reliable time series are available, suggesting the adoption of simple time series models as forecasting tools. However, despite this constraint on the span of data, a large number of macroeconomic variables (for a given time span) are available, making the class of dynamic factor models a reasonable alternative forecasting tool. The relative performance of these two forecasting approaches is compared by using data for five new Member States. The role of Euro-area information for forecasting and the usefulness of robustifying techniques such as intercept corrections are also evaluated. We find that factor models work well in general, although with marked differences across countries. Robustifying techniques are useful in a few cases, while Euro-area information is virtually irrelevant.

Number of Pages in PDF File: 48

Keywords: Factor models, forecasts, time series models, new Member States

JEL Classification: C53, C32, E37

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Date posted: June 1, 2005  

Suggested Citation

Banerjee, Anindya and Marcellino, Massimiliano Giuseppe and Masten, Igor, Forecasting Macroeconomic Variables for the New Member States of the European Union (May 2005). ECB Working Paper No. 482. Available at SSRN: http://ssrn.com/abstract=711161

Contact Information

Anindya Banerjee (Contact Author)
European University Institute - Department of Economics ( email )
Villa San Paolo
Via della Piazzuola 43
50133 Florence
Italy
+39 055 4685 356 (Phone)
+39 055 4685 202 (Fax)
University of Oxford - Department of Economics ( email )
Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom
+44 1865 279 700 (Phone)
+44 1865 279 687 (Fax)
Massimiliano Marcellino
European University Institute ( email )
Villa Schifanoia
133 via Bocaccio
Firenze (Florence), 50014
Italy
European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )
Via dei Roccettini 9
via delle Fontanelle 10
50016 San Domenico di Fiesole, Florence 50014
Italy
Bocconi University - Department of Economics ( email )
Via Gobbi 5
Milan, 20136
Italy
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Igor Masten
University of Ljubljana - Faculty of Economics ( email )
Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
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