Nonlinear Forecasting Using Factor-Augmented Models
Version of Record online: 10 OCT 2011
Copyright © 2011 John Wiley & Sons, Ltd.
Journal of Forecasting
Volume 32, Issue 1, pages 32–40, January 2013
How to Cite
Giovannetti, B. C. (2013), Nonlinear Forecasting Using Factor-Augmented Models. J. Forecast., 32: 32–40. doi: 10.1002/for.1248
- Issue online: 26 DEC 2012
- Version of Record online: 10 OCT 2011
- factor models;
Using factors in forecasting exercises reduces the dimensionality of the covariates set and, therefore, allows the forecaster to explore possible nonlinearities in the model. For an American macroeconomic dataset, I present evidence that the employment of nonlinear estimation methods can improve the out-of-sample forecasting accuracy for some macroeconomic variables, such as industrial production, employment, and Fed fund rate. Copyright © 2011 John Wiley & Sons, Ltd.