Researcher uses dynamic factor model for ‘nowcasting’
New model makes three additions to widely-used model
A working paper published by the Deutsche Bundesbank offers a new version of the dynamic factor model (DFM) that is used widely as a macroeconomic forecasting tool.
In Macroeconomic now and forecasting based on the factor error correction model using targeted mixed frequency indicators, Jeong-Ryeol Kurz-Kim adds "three refinements" to the DFM.
The author adds the mixed data sampling technique to "capture information from high frequency (monthly) indicators in order to estimate low frequency
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