The accession of ten countries into the European Union makes the forecasting of their key macroeconomic indicators an exercise of some importance. Because of the transition period, only short spans of reliable time series are available, suggesting the adoption of simple time series models as...

The Factor-augmented Error-Correction Model (FECM) generalizes the factor-augmented VAR (FAVAR) and the Error-Correction Model (ECM), combining error-correction, cointegration and dynamic factor models. It uses a larger set of variables compared to the ECM and incorporates the long-run...