Modelling and forecasting GDP using factor model: An empirical study from Bosnia and Herzegovina
In the most developed countries the first estimations of Gross Domestic Product (GDP) are available 30 days after the end of the reference quarter. In this paper, possibilities of creating an econometric model for making short-term forecasts of GDP in B&H have been explored. The database consist...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Sciendo
2020-05-01
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| Series: | Croatian Review of Economic, Business and Social Statistics |
| Subjects: | |
| Online Access: | https://doi.org/10.2478/crebss-2020-0002 |
| _version_ | 1797332200867233792 |
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| author | Abdić Ademir Resić Emina Abdić Adem |
| author_facet | Abdić Ademir Resić Emina Abdić Adem |
| author_sort | Abdić Ademir |
| collection | DOAJ |
| description | In the most developed countries the first estimations of Gross Domestic Product (GDP) are available 30 days after the end of the reference quarter. In this paper, possibilities of creating an econometric model for making short-term forecasts of GDP in B&H have been explored. The database consists of more than 100 daily, monthly and quarterly time series for the period 2006q1-2016q4. The aim of this study was to estimate and validate different factor models. Due to the length limit of the series, the factor analysis included 12 time series which had a correlation coefficient with a quarterly GDP at the absolute value greater than 0.8. The principal component analysis (PCA) and the orthogonal varimax rotation of the initial solution were applied. Three principal components are extracted from the set of the series, thus together accounting for 73.34% of the total variability of the given set of series. The final choice of the model for forecasting quarterly B&H GDP was selected based on a comparative analysis of the predictive efficiency of the analysed models for the in-sample period and for the out-of-sample period. The unbiasedness and efficiency of individual forecasts were tested using the Mincer-Zarnowitz regression, while a comparison of the accuracy of forecast of two models was tested by the Diebold-Mariano test. We have examined the justification of a combination of two forecasts using the Granger-Ramanathan regression. A factor model involving three factors has shown to be the most efficient factor model for forecasting quarterly B&H GDP. |
| first_indexed | 2024-03-08T07:46:07Z |
| format | Article |
| id | doaj.art-9be95a69390e450783733f2d4dbae74b |
| institution | Directory Open Access Journal |
| issn | 2459-5616 |
| language | English |
| last_indexed | 2024-03-08T07:46:07Z |
| publishDate | 2020-05-01 |
| publisher | Sciendo |
| record_format | Article |
| series | Croatian Review of Economic, Business and Social Statistics |
| spelling | doaj.art-9be95a69390e450783733f2d4dbae74b2024-02-02T16:19:59ZengSciendoCroatian Review of Economic, Business and Social Statistics2459-56162020-05-0161102610.2478/crebss-2020-0002Modelling and forecasting GDP using factor model: An empirical study from Bosnia and HerzegovinaAbdić Ademir0Resić Emina1Abdić Adem2School of Economics and Business, University of Sarajevo, Bosnia and HerzegovinaSchool of Economics and Business, University of Sarajevo, Bosnia and HerzegovinaSchool of Economics and Business, University of Sarajevo, Bosnia and HerzegovinaIn the most developed countries the first estimations of Gross Domestic Product (GDP) are available 30 days after the end of the reference quarter. In this paper, possibilities of creating an econometric model for making short-term forecasts of GDP in B&H have been explored. The database consists of more than 100 daily, monthly and quarterly time series for the period 2006q1-2016q4. The aim of this study was to estimate and validate different factor models. Due to the length limit of the series, the factor analysis included 12 time series which had a correlation coefficient with a quarterly GDP at the absolute value greater than 0.8. The principal component analysis (PCA) and the orthogonal varimax rotation of the initial solution were applied. Three principal components are extracted from the set of the series, thus together accounting for 73.34% of the total variability of the given set of series. The final choice of the model for forecasting quarterly B&H GDP was selected based on a comparative analysis of the predictive efficiency of the analysed models for the in-sample period and for the out-of-sample period. The unbiasedness and efficiency of individual forecasts were tested using the Mincer-Zarnowitz regression, while a comparison of the accuracy of forecast of two models was tested by the Diebold-Mariano test. We have examined the justification of a combination of two forecasts using the Granger-Ramanathan regression. A factor model involving three factors has shown to be the most efficient factor model for forecasting quarterly B&H GDP.https://doi.org/10.2478/crebss-2020-0002efficiencyfactor modelgross domestic product of bosnia and hercegovinaunbiasednessc4c83g3g32 |
| spellingShingle | Abdić Ademir Resić Emina Abdić Adem Modelling and forecasting GDP using factor model: An empirical study from Bosnia and Herzegovina Croatian Review of Economic, Business and Social Statistics efficiency factor model gross domestic product of bosnia and hercegovina unbiasedness c4 c83 g3 g32 |
| title | Modelling and forecasting GDP using factor model: An empirical study from Bosnia and Herzegovina |
| title_full | Modelling and forecasting GDP using factor model: An empirical study from Bosnia and Herzegovina |
| title_fullStr | Modelling and forecasting GDP using factor model: An empirical study from Bosnia and Herzegovina |
| title_full_unstemmed | Modelling and forecasting GDP using factor model: An empirical study from Bosnia and Herzegovina |
| title_short | Modelling and forecasting GDP using factor model: An empirical study from Bosnia and Herzegovina |
| title_sort | modelling and forecasting gdp using factor model an empirical study from bosnia and herzegovina |
| topic | efficiency factor model gross domestic product of bosnia and hercegovina unbiasedness c4 c83 g3 g32 |
| url | https://doi.org/10.2478/crebss-2020-0002 |
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