Famidas: A Mixed Frequency Factor Model with MIDAS Structure

Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 3

28 Pages Posted: 26 Aug 2010

See all articles by Cecilia Frale

Cecilia Frale

Government of the Italian Republic (Italy) - Department of the Treasury

Libero Monteforte

Bank of Italy

Multiple version iconThere are 2 versions of this paper

Date Written: July 3, 2010

Abstract

In this paper a dynamic factor model with mixed frequency is proposed (FaMIDAS), where the past observations of high frequency indicators are used following the MIDAS approach. This structure is able to represent with richer dynamics the information content of the economic indicators and produces smoothed factors and forecasts. In addition, it is particularly suited for real time forecast as it reduces the problem of the unbalanced data set and of the revisions in preliminary data. In the empirical application we specify and estimate a FaMIDAS to forecast Italian quarterly GDP. The short-term forecasting performance is evaluated against other mixed frequency models in a pseudo-real time experiment, also allowing for pooled forecast from factor models.

Keywords: Mixed frequency models, Dynamic factor Models, MIDAS, Forecasting

JEL Classification: E32, E37, C53

Suggested Citation

Frale, Cecilia and Monteforte, Libero, Famidas: A Mixed Frequency Factor Model with MIDAS Structure (July 3, 2010). Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 3. Available at SSRN: https://ssrn.com/abstract=1664951 or http://dx.doi.org/10.2139/ssrn.1664951

Cecilia Frale (Contact Author)

Government of the Italian Republic (Italy) - Department of the Treasury ( email )

Via XX Settembre, 87
Rome, 00197
Italy

Libero Monteforte

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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