George Kapetanios ,
Queen Mary, University of London
November 1, 2002
Recent work in the macroeconometric literature considers the problem of summarising efficiently a large set of variables and using this summary for a variety of purposes including forecasting. This paper applies a new factor extraction method to the extraction of core inflation and forecasting of UK inflation in the recent past.
J.E.L classification codes: C13, C32
Keywords:Factor models, Subspace methods, State space models