Factor Model Forecasts for New Zealand
by Troy D. Matheson
Reserve Bank of New Zealand
This paper focuses on forecasting four key New Zealand macroeconomic variables
using a dynamic factor model and a large number of predictors. We compare the
(simulated) real-time forecasting performance of the factor model with a
variety of other time-series models (including the Reserve Bank of New
Zealandís published forecasts), and we gauge the sensitivity of our results to
alternative variable-selection algorithms. We find that the factor model
performs particularly well at longer horizons.
JEL Codes: C32, E47.
(PDF, 69 pages 418 kb)