Forecasting world output: the rising importance of emerging economies
AbstractAssessing the global economic outlook is a fundamentally important task of international financial institutions, governments and central banks. In this paper we focus on the consequences of the rapid growth of emerging markets for monitoring and forecasting the global outlook. Our main results are that (i) the rise of the emerging countries has sharply altered the correlation of growth rates among the main economic areas; (ii) this is clearly detectable in forecasting equations as a structural break occurring in the 1990s; (iii) hence, inferences on global developments based solely on the industrialized countries are highly unreliable; (iv) the otherwise cumbersome task of monitoring many – and less studied – countries can be tackled by resorting to very simple bridge models (BM); (v) BM performance is in line with that of the most widely quoted predictions (WEO, Consensus) both before and during the recent crisis; (vi) for some emerging economies, BMs would have provided even better forecasts during the recent crisis.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 853.
Date of creation: Feb 2012
Date of revision:
GDP forecast; emerging and Asian markets; bridge models; forecasting ability;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect 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
- F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-21 (All new papers)
- NEP-CWA-2012-03-21 (Central & Western Asia)
- NEP-FOR-2012-03-21 (Forecasting)
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