FaMIDAS: A Mixed Frequency Factor Model with MIDAS Structure

36 Pages Posted: 9 May 2011

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: January 12, 2011

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, the Kalman filter is applied, which is particularly suited for dealing with unbalanced data set and revisions in the preliminary data. In the empirical application for the 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 (January 12, 2011). Bank of Italy Temi di Discussione (Working Paper) No. 788. Available at SSRN: https://ssrn.com/abstract=1829984 or http://dx.doi.org/10.2139/ssrn.1829984

Cecilia Frale

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

Via XX Settembre, 87
Rome, 00197
Italy

Libero Monteforte (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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