A dynamic factor model for the Mexican economy: are common trends useful when predicting economic activity?

dc.creatorCorona, Francisco
dc.creatorGonzález-Farías, Graciela
dc.creatorOrraca, Pedro
dc.date2019-05-22T20:08:51Z
dc.date2019-05-22T20:08:51Z
dc.date2017-09-15
dc.date.accessioned2023-07-21T16:34:03Z
dc.date.available2023-07-21T16:34:03Z
dc.identifier2196-436X
dc.identifierhttp://hdl.handle.net/11651/3229
dc.identifierEn: Latin American Economic Review, volumen 26, número 1, septiembre de 2017
dc.identifierhttps://doi.org/10.1007/s40503-017-0044-7
dc.identifierhttps://link.springer.com/article/10.1007/s40503-017-0044-7
dc.identifier.urihttps://repositorioslatinoamericanos.uchile.cl/handle/2250/7730439
dc.descriptionDynamic factor models, common trends, factor-augmented vector autoregressive model, partial least squares, forecast error
dc.descriptionIn this paper we propose to use the common trends of the Mexican economy in order to predict economic activity one and two steps ahead. We exploit the cointegration properties of the macroeconomic time series, such that, when the series are I(1) and cointegrated, there is a factor representation, where the common factors are the common trends of the macroeconomic variables. Thus, we estimate a large non-stationary dynamic factor model using principal components (PC) as suggested by Bai (J Econom 122(1):137–183, 2004), where the estimated common factors are used in a factor-augmented vector autoregressive model to forecast the Global Index of Economic Activity. Additionally, we estimate the common trends through partial least squares. The results indicate that the common trends are useful to predict Mexican economic activity, and reduce the forecast error with respect to benchmark models, mainly when estimated using PC.
dc.formatapplication/PDF
dc.formatapplication/pdf
dc.languageeng
dc.publisherCentro de Investigación y Docencia Económicas
dc.relationLatin American Economic Review, volumen 26, número 1, septiembre de 2017
dc.relation"CONACYT CB-2015-01-252996"
dc.rightsLa revista Latin American Economic Review autoriza a poner en acceso abierto de conformidad con las licencias CREATIVE COMMONS, aprobadas por el Consejo Académico Administrativo del CIDE, las cuales establecen los parámetros de difusión de las obras con fines no comerciales. Lo anterior sin perjuicio de los derechos morales que corresponden a los autores.
dc.rightsCreative Commons Reconocimiento-NoComercial-SinObraDerivada 4.0 International CC BY-NC-ND
dc.source2196-436X
dc.titleA dynamic factor model for the Mexican economy: are common trends useful when predicting economic activity?
dc.typeArtículo


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