This paper uses the dynamic factor analysis methodology developed by Stock and Watson (1998) in order to forecast inflation and the Imacec, an index of economic activity of common use for the Chilean economy. Our results indicate that using factors in the process of forecasting these...

In this paper we use the dynamic factor analysis methodology developed by Stock and Watson (1998) in order to forecast inflation and an index of economic activity for the Chilean economy. Our results indicate that using factors in the process of forecasting of these macroeconomic variables...