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Forecasting exports with targeted predictors
2018
Authors
Publication Year
2018
Abstract
This article applies factor models to forecast monthly Portuguese exports by resorting to
an international dataset covering the country’s main trading partners.We find noteworthy
forecasting gains up to 12-month ahead when soft indicators for these countries are pooled
and predictors are pre-selected prior to factor estimation. Resorting solely on national
data and with no pre-selection of predictors yields greater forecasting accuracy when
nowcasting. Hence, data from Portugal’s main trading partners is more informative to
produce h-step ahead forecasts. In turn, when hard and soft data are pooled, forecast
accuracy is, in general, not enhanced.
Document link
Journal (repec)
Economic Studies