The economic shocks brought about by the Great Recession triggered drastic reactions by policy makers and private agents alike. Such dramatic economic consequences have lead economics agents to acknowledge the need for new tools to monitor economic developments in real time, and learn early detection methods to foresee downturns and recoveries. Short-term Forecasting for Empirical Economists seeks to close the gap between research and applied short-term forecasting. The authors review some of the key theoretical results and empirical findings in the recent literature on short-term...

Factor Extraction in Dynamic Factor Models: Kalman Filter Versus Principal Components surveys the literature on factor extraction in the context of Dynamic Factor Models (DFMs) fitted to multivariate systems of economic and financial variables. Many of the most popular factor extraction procedures often used in empirical applications are based on either Principal Components (PC) or Kalman filter and smoothing (KFS) techniques. First, the authors show that the KFS factors are a weighted average of the contemporaneous information (PC factors) and the past information and that the weights of the...