Are More Data Always Better for Factor Analysis' Results for the Euro Area, the Six Largest Euro Area Countries and the UK
39 Pages Posted: 13 May 2009
Date Written: May 13, 2009
Factor based forecasting has been at the forefront of developments in the macro-econometric forecasting literature in the recent past. Despite the flurry of activity in the area, a number of specification issues such as the choice of the number of factors in the forecasting regression, the benefits of combining factor-based forecasts and the choice of the dataset from which to extract the factors remain partly unaddressed. This paper provides a comprehensive empirical investigation of these issues using data for the euro area, the six largest euro area countries, and the UK.
Keywords: Factors, Large Datasets, Forecast Combinations
JEL Classification: C100, C150, C530
Suggested Citation: Suggested Citation