Real-time forecasting US GDP from small-scale factor models
AbstractThis paper proposes two refinements to the single-index dynamic factor model developed by Aruoba and Diebold (AD, 2010) to monitor US economic activity in real time. First, we adapt the model to include survey data and financial indicators. Second, we examine the predictive performance of the model when the goal is to forecast GDP growth. We find that our model is unequivocally the preferred alternative to compute backcasts. In nowcasting and forecasting, our model is able to forecast growth as well as AD and much better than several baseline alternatives. In addition, we find that our model could be used to predict more accurately the US business cycles.
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Bibliographic InfoPaper provided by BBVA Bank, Economic Research Department in its series Working Papers with number 1210.
Length: 15 pages
Date of creation: Jun 2012
Date of revision:
real-time forecasting; US GDP; business cycles.;
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 &bull Diffusion Processes
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-08 (All new papers)
- NEP-BEC-2012-07-08 (Business Economics)
- NEP-FDG-2012-07-08 (Financial Development & Growth)
- NEP-FOR-2012-07-08 (Forecasting)
- NEP-MAC-2012-07-08 (Macroeconomics)
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- Angel de la Fuente & José E. Boscá, 2011.
"Gasto educativo por regiones y niveles en 2005,"
UFAE and IAE Working Papers
873.11, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- 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.
- Maximo Camacho & Marcos Dal Bianco & Jaime Martinez-Martin, 2013. "Short-Run Forecasting of Argentine GDP Growth," Working Papers 1314, BBVA Bank, Economic Research Department.
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