Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153493
Authors: 
Jakaitiene, Audrone
Dées, Stéphane
Year of Publication: 
2009
Series/Report no.: 
ECB Working Paper 1059
Abstract: 
Forecasting the world economy is a difficult task given the complex interrelationships within and across countries. This paper proposes a number of approaches to forecast short-term changes in selected world economic variables and aims, first, at ranking various forecasting methods in terms of forecast accuracy and, second, at checking whether methods forecasting di- rectly aggregate variables (direct approaches)out-perform methods based on the aggregation of country- specific forecasts (bottom-up approaches). Overall, all methods perform better than a simple benchmark for short horizons (up to three months ahead). Among the forecasting approaches used, factor models appear to perform the best. Moreover, direct approaches out-perform bottom-up ones for real variables, but not for prices. Finally, when country-specific forecasts are adjusted to match direct forecasts at the aggregate levels (top-down approaches), the forecast accuracy is neither improved nor deteriorated (i.e. top-down and bottom-up approaches are broadly equivalent in terms of country-specific forecast accuracy).
Subjects: 
Factor models
forecasts
Time series models
JEL: 
C53
C32
E37
F17
Document Type: 
Working Paper

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