Forecasting with FAVAR: Macroeconomic versus Financial Factors
Abstract
We assess the predictive power of macroeconomic and financial latent factorson the key variables for the US economy before and after the recent Great Re-cession. We implement a forecasting horserace among Factor Augmented... [ view full abstract ]
We assess the predictive power of macroeconomic and financial latent factors
on the key variables for the US economy before and after the recent Great Re-
cession. We implement a forecasting horserace among Factor Augmented VAR
(FAVAR), Classical, and Bayesian VAR models.
FAVAR models outperform others. Focusing only on macroeconomic or on
financial latent factors, we find how the financial variables have not a driver role
in forecasting the US economy including the Great Recession.
Authors
-
Alessia Paccagnini
(University College Dublin)
Topic Areas
Macroeconomics , Financial Economics
Session
7A » Econometrics and Forecasting (13:30 - Friday, 11th May)
Paper
paperFAVARDecember2017.pdf