WALS Estimation and Forecasting in Factor-Based Dynamic Models with an Application to Armenia
CentER Discussion Paper Series No. 2011-054
20 Pages Posted: 10 May 2011
Date Written: May 1, 2011
Two model averaging approaches are used and compared in estimating and forecasting dynamic factor models, the well-known BMA and the recently developed WALS. Both methods propose to combine frequentist estimators using Bayesian weights. We apply our framework to the Armenian economy using quarterly data from 2000-2010, and we estimate and forecast real GDP and inflation dynamics.
Keywords: Dynamic models, Factor analysis, Model averaging, Monte
JEL Classification: C11, C13, C52, C53, E52, E58
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