Model selection and estimation are important topics in econometric analysis which can become considerably complicated in high dimensional settings, where the set of possible regressors can become larger than the set of available observations. For large scale problems the penalized regression...

We compare a number of data-rich prediction methods that are widely used in macroeconomic forecasting with a lesser known alternative: partial least squares (PLS) regression. In this method, linear, orthogonal combinations of a large number of predictor variables are constructed such that the...