A large factor model for forecasting macroeconomic variables in South Africa

Gupta, Rangan; Kabundi, Alain

dc.contributor.author	Gupta, Rangan
dc.contributor.author	Kabundi, Alain
dc.date.accessioned	2011-01-28T08:54:11Z
dc.date.available	2011-01-28T08:54:11Z
dc.date.issued	2011-10
dc.description.abstract	This paper uses large Factor Models (FMs), which accommodate a large cross-section of macroeconomic time series for forecasting the per capita growth rate, inflation, and the nominal short-term interest rate for the South African economy. The FMs used in this study contain 267 quarterly series observed over the period 1980Q1–2006Q4. The results, based on the RMSEs of one- to four-quarter-ahead out-of-sample forecasts from 2001Q1 to 2006Q4, indicate that the FMs tend to outperform alternative models such as an unrestricted VAR, Bayesian VARs (BVARs) and a typical New Keynesian Dynamic Stochastic General Equilibrium (NKDSGE) model in forecasting the three variables under consideration, hence indicating the blessings of dimensionality.	en
dc.identifier.citation	Gupta, R & Kabundi, AA 2011, 'A large factor model for forecasting macroeconomic variables in South Africa', International Journal of Forecasting, vol. 27, no. 4, pp. 1076-1088, doi:10.1016/j.ijforecast.2010.10.001	en
dc.identifier.issn	0169-2070
dc.identifier.other	10.1016/j.ijforecast.2010.10.001
dc.identifier.uri	http://hdl.handle.net/2263/15793
dc.language.iso	en	en_US
dc.publisher	Elsevier	en_US
dc.rights	© 2010 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved. Notice : this is the author’s version of a work that was accepted for publication in International Journal of Forecasting. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. A definitive version was subsequently published in International Journal of Forecasting, vol. 27, no. 4, pp. 1076-1088, 2011. doi : 10.1016/j.ijforecast.2010.10.001.	en_US
dc.subject	Factor Models (FMs)	en
dc.subject	VAR model	en
dc.subject	Bayesian VARs (BVARs)	en
dc.subject	New Keynesian Dynamic Stochastic General Equilibrium (NKDSGE)	en
dc.subject	Forecast accuracy	en
dc.subject.lcsh	Economic forecasting -- South Africa -- Econometric models	en
dc.subject.lcsh	Macroeconomics -- South Africa -- Econometric models	en
dc.title	A large factor model for forecasting macroeconomic variables in South Africa	en
dc.type	Postprint Article	en