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A nowcasting model for Ecuador: Implementing a time-varying mean output growth

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  • González-Astudillo, Manuel
  • Baquero, Daniel

Abstract

We propose a model to nowcast the annual growth rate of real GDP for Ecuador, whose economy lacks timely macroeconomic information for some key variables and has gone through unstable periods due to its dependence on oil exports. Our specification combines monthly information for 30 macroeconomic and financial variables with quarterly information for real GDP in a mixed-frequency approach. Our setup includes a time-varying coefficient on the mean annual growth rate of output to allow the model to incorporate prolonged periods of low or high growth. The model produces more accurate nowcasts of real output growth in pseudo out-of-sample exercises than a nowcasting model that assumes a constant mean real GDP growth rate. We also conduct sensitivity analyses on our nowcasting model within the time-varying mean setup and find that including financial variables can be detrimental to the performance of the proposed model.

Suggested Citation

  • González-Astudillo, Manuel & Baquero, Daniel, 2019. "A nowcasting model for Ecuador: Implementing a time-varying mean output growth," Economic Modelling, Elsevier, vol. 82(C), pages 250-263.
    • Handle: RePEc:eee:ecmode:v:82:y:2019:i:c:p:250-263
    DOI: 10.1016/j.econmod.2019.01.010
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    Cited by:

    1. Luciano Campos & Danilo Leiva-León & Steven Zapata- Álvarez, 2022. "Latin American Falls, Rebounds and Tail Risks," Borradores de Economia 1201, Banco de la Republica de Colombia.
    2. Danilo Cascaldi-Garcia & Matteo Luciani & Michele Modugno, 2023. "Lessons from Nowcasting GDP across the World," International Finance Discussion Papers 1385, Board of Governors of the Federal Reserve System (U.S.).
    3. Juan Tenorio & Wilder Perez, 2024. "Monthly GDP nowcasting with Machine Learning and Unstructured Data," Papers 2402.04165, arXiv.org.
    4. Guillermo Avellán & Manuel González-Astudillo & Juan José Salcedo Cruz, 2022. "Measuring uncertainty: A streamlined application for the Ecuadorian economy," Empirical Economics, Springer, vol. 62(4), pages 1517-1542, April.

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    More about this item

    Keywords

    Nowcasting model; Time-varying coefficients; Ecuador; Secular stagnation;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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