The Euro-Sting revisited: PMI versus ESI to obtain euro area GDP forecasts
AbstractThis paper uses an extension of the Euro-Sting single-index dynamic factor model to construct short-term forecasts of quarterly GDP growth for the euro area, as also including financial variables as leading indicators. From a simulated real-time exercise, the model is used to investigate the forecasting accuracy across the different phases of the business cycle. In addition, the model is used to evaluate the relative forecasting ability of the two most watched business cycle surveys for the eurozone, the PMI and the ESI. We show that the latter produces more accurate GDP forecasts than the former. Finally, the proposed model is also characterized by its great ability to capture the European business cycle, as well as the probabilities of expansion and/or contraction periods.
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Bibliographic InfoPaper provided by BBVA Bank, Economic Research Department in its series Working Papers with number 1120.
Length: 23 pages
Date of creation: Jun 2011
Date of revision:
Real-time forecasting; dynamic factor model; eurozone GDP; business cycle;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E27 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-27 (All new papers)
- NEP-CBA-2011-07-27 (Central Banking)
- NEP-EEC-2011-07-27 (European Economics)
- NEP-FOR-2011-07-27 (Forecasting)
- NEP-MAC-2011-07-27 (Macroeconomics)
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- Javier Alonso & Jasmina Bjeletic & Jasmina Bjeletic & Ivonne Ordonez & Carolina Romero & David Tuesta & Carlos Herrera & Soledad Hormazabal, 2009. "Un balance de la inversion de los fondos de pensiones en infraestructura: la experiencia en Latinoamerica," Working Papers 0920, BBVA Bank, Economic Research Department.
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