Eric Hillebrand awarded Marie Curie Career Integration Grant

Eric Hillebrand, CREATES, has been awarded a Marie Curie Career Integration Grant of DKK 750,000 for his research that takes its point of departure in the fact that decision makers at central banks, government and financial institutions, and academia are inundated by economic data nowadays.  Time series from different sources, at different levels of accuracy and aggregation are available.  His research aims at a class of models that extracts a small number of driving factors out of large data sets in order to enable decision makers to compute forecasts from a small tractable set of factors.  These dynamic factor models usually extract the factors out of the right-hand side predictors in a regression equation, but are blind to what determines the variation in the forecast target on the left-hand side.  The research aims at pursuing a strategy that has been proposed in earlier work (Hillebrand, Lee, Li, and Huang 2012, CREATES working paper RP2012-17) to “supervise” the selection of the factors with regard to the forecast target.  An important application of the method is forecast models for output growth and inflation using information in the yield curve, an issue at the forefront of the current Euro crisis.