Dynamic Factor Models and Forecasting Finnish Macroeconomic Variables

In recent years, thanks to developments in information technology, large-dimensional datasets have been increasingly available. Researchers now have access to thousands of economic series and the information contained in them can be used to create accurate forecasts and to test economic theories. To exploit this large amount of information, researchers and policymakers need an appropriate econometric model.Usual time series models, vector autoregression for example, cannot incorporate more than a few variables. There are two ways to solve this problem: use variable selection procedures or gather the information contained in the series to create an index model. This thesis focuses on one of the most widespread index model, the dynamic factor model (the theory behind this model, based on previous literature, is the core of the first part of this study), and its use in forecasting Finnish macroeconomic indicators (which is the focus of the second part of the thesis). In particular, I forecast economic activity indicators (e.g. GDP) and price indicators (e.g. consumer price index), from 3 large Finnish datasets. The first dataset contains a large series of aggregated data obtained from the Statistics Finland database. The second dataset is composed by economic indicators from Bank of Finland. The last dataset is formed by disaggregated data from Statistic Finland, which I call micro dataset. The forecasts are computed following a two steps procedure: in the first step I estimate a set of common factors from the original dataset. The second step consists in formulating forecasting equations including the factors extracted previously. The predictions are evaluated using relative mean squared forecast error, where the benchmark model is a univariate autoregressive model. The results are dataset-dependent. The forecasts based on factor models are very accurate for the first dataset (the Statistics Finland one), while they are considerably worse for the Bank of Finland dataset. The forecasts derived from the micro dataset are still good, but less accurate than the ones obtained in the first case. This work leads to multiple research developments. The results here obtained can be replicated for longer datasets. The non-aggregated data can be represented in an even more disaggregated form (firm level). Finally, the use of the micro data, one of the major contributions of this thesis, can be useful in the imputation of missing values and the creation of flash estimates of macroeconomic indicator (nowcasting).

A Dynamic Factor Approach to Mortality Modelling

Longevity risk has become one of the major risks facing the insurance and pensions markets globally. The trade in longevity risk is underpinned by accurate forecasting of mortality rates. Using techniques from macroeconomic forecasting, we propose a dynamic factor model of mortality that fits and forecasts mortality rates parsimoniously.We compare the forecasting quality of this model and of existing models and find that the dynamic factor model generally provides superior forecasts when applied to international mortality data. We also show that existing multifactorial models have superior fit but their forecasting performance worsens as more factors are added. The dynamic factor approach used here can potentially be further improved upon by applying an appropriate stopping rule for the number of static and dynamic factors. 

Seasonal Dynamic Factor Analysis and Bootstrap Inference: Application to Electricity Market Forecasting

In this work, we propose the Seasonal Dynamic Factor Analysis (SeaDFA), an extension of Nonstationary Dynamic Factor Analysis, through which one can deal with dimensionality reduction in vectors of time series in such a way that both common and specific components are extracted. Furthermore, common factors are able to capture not only regular dynamics (stationary or not) but also seasonal ones, by means of the common factors following a multiplicative seasonal VARIMA(p, d, q) × (P, D, Q)s model. Additionally, a bootstrap procedure that does not need a backward representation of the model is proposed to be able to make inference for all the parameters in the model. A bootstrap scheme developed for forecasting includes uncertainty due to parameter estimation, allowing enhanced coverage of forecasting intervals. A challenging application is provided. The new proposed model and a bootstrap scheme are applied to an innovative subject in electricity markets: the computation of long-term point forecasts and prediction intervals of electricity prices. Several appendices with technical details, an illustrative example, and an additional table are available online as Supplementary Materials.

A dynamic factor model for mid-term forecasting of wind power generation

The main objective of this paper is the development and application of multivariate time series models for forecasting aggregated wind power production in a country or region. Nowadays, in Spain, Denmark or Germany there is an increasing penetration of this kind of renewable energy, somehow to reduce energy dependence on the exterior, but always linked with the increaseand uncertainty affecting the prices of fossil fuels. The disposal of accurate predictions of wind power generation is a crucial task both for the System Operator as well as for all the agents of the Market. However, the vast majority of works rarely onsider forecasting horizons longer than 48 hours, although they are of interest for the system planning and operation. In this paper we use Dynamic Factor Analysis, adapting and modifying it conveniently, to reach our aim: the computation of accurate forecasts for the aggregated wind power production in a country for a forecasting horizon as long as possible, particularly up to 60 days (2 months). We illustrate this methodology and the results obtained for real data in the leading country in wind power production: Denmark

Vertical dynamic interaction of trains and rail steel bridges

Rail steel bridges are vulnerable to high impact forces due to the passage of trains; unfortunately the determination of these transient impact forces is not straightforward as these are affected by a large number of parameters, including the wagon design, the wheel-rail contact and the design parameters of the bridge deck and track, as well as the operational parameters – wheel load and speed. To determine these impact forces, a detailed rail train-track/bridge dynamic interaction model has been developed, which includes a comprehensive train model using multi-body dynamics approach and a flexible track/bridge model using Euler– Bernoulli beam theory. Single and multi-span bridges have been modelled to examine their dynamic characteristics. From the single span bridge, the train critical speed is determined; the minimum distance of two peak loadings is found to affect the train critical speed. The impact factor and the dynamic characteristics are discussed.

Dynamic fator Models for bivariate Count Data: an application to fire activity

The study of forest re activity, in its several aspects, is essencial to understand the phenomenon and to prevent environmental public catastrophes. In this context the analysis of monthly number of res along several years is one aspect to have into account in order to better comprehend this tematic. The goal of this work is to analyze the monthly number of forest res in the neighboring districts of Aveiro and Coimbra, Portugal, through dynamic factor models for bivariate count series. We use a bayesian approach, through MCMC methods, to estimate the model parameters as well as to estimate the common latent factor to both series.

Investigation of drive-train dynamics of mechanical transmissions incorporating cycloidal drives

Cycloidal drives are compact, high-ratio gear transmission systems used in a wide range of mechanical applications from conveyor drives to articulated robots. This research hypothesises that these drives can be successfully applied in dynamic loading situations and thereby focuses on the understanding of differences between static and dynamic loading conditions where load varies with time. New methods of studying the behaviour of these drives under static and dynamic loading circumstances were developed, leading to novel understanding and knowledge. A new model was developed to facilitate research and development on Cycloidal drives with potential benefits for manufacturing, robotics and mechanical-process-industries worldwide.

三峡库区滑坡的时空分布、成因及其预报模式

Landslides are widely distributed along the main stream banks of the Three Gorges Reservoir area. Especially with the acceleration of the human economic activities in the recent 30 years, the occurrence of landslide hazards in the local area trends to be more serious. Because of the special geological, topographic and climatic conditions of the Three Gorges areas, many Paleo-landslides are found along the gentle slope terrain of the population relocation sites. Under the natural condition, the Paleo-landslides usually keep stable. The Paleo-landslides might revive while they are influenced under the strong rainfall, water storage and migration engineering disturbance. Therefore, the prediction and prevention of landslide hazards have become the important problem involving with the safety of migration engineering of the Three Gorges Reservoir area.The past research on the landslides of the Three Gorges area is mainly concentrated on the stability analysis of individual landslide, and importance was little attached to the knowledge on the geological environment background of the formation of regional landslides. So, the relationship between distribution and evolution of landslides and globe dynamic processes was very scarce in the past research. With further study, it becomes difficult to explain the reasons for the magnitude and frequency of major geological hazards in terms of single endogenic or exogenic processes. It is possible to resolve the causes of major landslides in the Three Gorges area through the systematic research of regional tectonics and river evolution history.In present paper, based on the view of coupling of earth's endogenic and exogenic processes, the author researches the temporal and spacial distribution and formation evolution of major landslides(Volume^lOOX 104m3) in the Three Gorges Reservoir area through integration of first-hand sources statistics, .geological evolution history, isotope dating and numerical simulation method etc. And considering the main formation factors of landslides (topography, geology and rainfall condition), the author discusses the occurrence probability and prediction model of rainfall induced landslides.The distribution and magnitude of Paleo-landslides in the Three Gorges area is mainly controlled by lithology, geological structure, bank slope shape and geostress field etc. The major Paleo-landslides are concentrated on the periods 2.7-15.0 X 104aB.R, which conrresponds to the warm and wettest Paleoclimate stages. In the same time, the Three Gorges area experiences with the quickest crust uplift phase since 15.0X 104aB.P. It is indicated that the dynamic factor of polyphase major Paleo-landslides is the coupling processes of neotectonic movement and Quaternary climate changes. Based on the numerical simulation results of the formation evolution of Baota landslide, the quick crust uplift makes the deep river incision and the geostress relief causes the rock body of banks flexible. Under the strong rainfall condition, the pore-water pressure resulted from rain penetration and high flood level can have the shear strength of weak structural plane decrease to a great degree. Therefore, the bank slope is easy to slide at the slope bottom where shear stress concentrates. Finally, it forms the composite draught-traction type landslide of dip stratified rocks.The susceptibility idea for the rainfall induced landslide is put forward in this paper and the degree of susceptibility is graded in terms of the topography and geological conditions of landslides. Base on the integration with geological environment factors and rainfall condition, the author gives a new probabilistic prediction model for rainfall induced landslides. As an example from Chongqing City of the Three Gorges area, selecting the 5 factors of topography, lithology combination, slope shape, rock structure and hydrogeology and 21 kinds of status as prediction variables, the susceptibility zonation is carried out by information methods. The prediction criterion of landslides is established by two factors: the maximum 24 hour rainfall and the antecedent effective precipitation of 15 days. The new prediction model is possible to actualize the real-time regional landslide prediction and improve accuracy of landslide forecast.

影响汉字手写体识别的静态特征与动态特征的研究

In this study, the recognition of handwritten Chinese characters is studied by analyzing their static and dynamic factors. The main results are as follows: 1) The static factors of handwritten Chinese characters that have significant effects on recognition are similarity with other handwritten characters, changes of relative positions of strokes and shape changes of strokes; 2) The methods of writing handwritten Chinese characters used by different calligraphers are significantly consistent; 3)The subjects are sensitive to dynamic information contained in the handwritten Chinese characters; 4)The dynamic factors that effect recognition of handwritten Chinese characters are changes in the number of strokes and changes in the direction of strokes; 5)Although both static and dynamic factors of handwritten Chinese characters have significant effects on the recognition of handwritten Chinese characters, the effect of static factors plays a major role and the effect of dynamic factor plays of secondary role.

Single-subject research designs and data analyses for assessing elite athletes’ conditioning

Research in conditioning (all the processes of preparation for competition) has used group research designs, where multiple athletes are observed at one or more points in time. However, empirical reports of large inter-individual differences in response to conditioning regimens suggest that applied conditioning research would greatly benefit from single-subject research designs. Single-subject research designs allow us to find out the extent to which a specific conditioning regimen works for a specific athlete, as opposed to the average athlete, who is the focal point of group research designs. The aim of the following review is to outline the strategies and procedures of single-subject research as they pertain to the assessment of conditioning for individual athletes. The four main experimental designs in single-subject research are: the AB design, reversal (withdrawal) designs and their extensions, multiple baseline designs and alternating treatment designs. Visual and statistical analyses commonly used to analyse single-subject data, and advantages and limitations are discussed. Modelling of multivariate single-subject data using techniques such as dynamic factor analysis and structural equation modelling may identify individualised models of conditioning leading to better prediction of performance. Despite problems associated with data analyses in single-subject research (e.g. serial dependency), sports scientists should use single-subject research designs in applied conditioning research to understand how well an intervention (e.g. a training method) works and to predict performance for a particular athlete.

Os determinantes macroeconômicos da estrutura a termo das expectativas de inflação no Brasil

Este trabalho visa analisar a dinâmica das expectativas de inflação em função das condições macroeconômicas. Para tal, extraímos as curvas de inflação implícita na curva de títulos públicos pré-fixados e estimamos um modelo de fatores dinâmicos para sua estrutura a termo. Os fatores do modelo correspondem ao nível, inclinação e curvatura da estrutura a termo, que variam ao longo do tempo conforme os movimentos no câmbio, na inflação, no índice de commodities e no risco Brasil implícito no CDS. Após um choque de um desvio padrão no câmbio ou na inflação, a curva de inflação implícita se desloca positivamente, especialmente no curto prazo e no longo prazo. Um choque no índice de commodities também desloca a curva de inflação implícita positivamente, afetando especialmente a parte curta da curva. Em contraste, um choque no risco Brasil desloca a curva de inflação implícita paralelamente para baixo.

O fator comum associado à dinâmica de preços das commodities : a relação de cointegração e o fator dinâmico

Este trabalho analisa a importância dos fatores comuns na evolução recente dos preços dos metais no período entre 1995 e 2013. Para isso, estimam-se modelos cointegrados de VAR e também um modelo de fator dinâmico bayesiano. Dado o efeito da financeirização das commodities, DFM pode capturar efeitos dinâmicos comuns a todas as commodities. Além disso, os dados em painel são aplicados para usar toda a heterogeneidade entre as commodities durante o período de análise. Nossos resultados mostram que a taxa de juros, taxa efetiva do dólar americano e também os dados de consumo têm efeito permanente nos preços das commodities. Observa-se ainda a existência de um fator dinâmico comum significativo para a maioria dos preços das commodities metálicas, que tornou-se recentemente mais importante na evolução dos preços das commodities.

A monthly indicator of Brazilian GDP. The Brazilian business cycle and growth cycle

This paper constructs an indicator of Brazilian GDP at the monthly ftequency. The peculiar instability and abrupt changes of regimes in the dynamic behavior of the Brazilian business cycle were explicitly modeled within nonlinear ftameworks. In particular, a Markov switching dynarnic factor model was used to combine several macroeconomic variables that display simultaneous comovements with aggregate economic activity. The model generates as output a monthly indicator of the Brazilian GDP and real time probabilities of the current phase of the Brazilian business cycle. The monthly indicator shows a remarkable historical conformity with cyclical movements of GDP. In addition, the estimated filtered probabilities predict ali recessions in sample and out-of-sample. The ability of the indicator in linear forecasting growth rates of GDP is also examined. The estimated indicator displays a better in-sample and out-of-sample predictive performance in forecasting growth rates of real GDP, compared to a linear autoregressive model for GDP. These results suggest that the estimated monthly indicator can be used to forecast GDP and to monitor the state of the Brazilian economy in real time.

A estrutura hierárquica das variações de preços e o núcleo da inflação

The approach proposed here explores the hierarchical nature of item-level data on price changes. On one hand, price data is naturally organized around a regional strucuture, with variations being observed on separate cities. Moreover, the itens that comprise the natural structure of CPIs are also normally interpreted in terms of groups that have economic interpretations, such as tradables and non-tradables, energyrelated, raw foodstuff, monitored prices, etc. The hierarchical dynamic factor model allow the estimation of multiple factors that are naturally interpreted as relating to each of these regional and economic levels.