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Nowcasting German GDP: A comparison of bridge and factor models

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  • Antipa, P.
  • Barhoumi, K.
  • Brunhes-Lesage, V.
  • Darné, O.

Abstract

Governments and central banks need to have an accurate and timely assessment of Gross Domestic Product's (GDP) growth rate for the current quarter, as this is essential for providing a reliable and early analysis of the current economic situation. This paper presents a series of models conceived to forecast the current German GDP's quarterly growth rate. These models are designed to be used on a monthly basis by integrating monthly economic information through bridge models, thus allowing for the economic interpretation of the data. We do also forecast German GDP by dynamic factor models. The combination of these two approaches allows selecting economically relevant explanatory variables among a large data set of hard and soft data. In addition, a rolling forecast study is carried out to assess the forecasting performance of the estimated models. To this end, publication lags are taken into account in order to run pseudo out-of-sample forecasts. We show that it is possible to get reasonably good estimates of current quarterly GDP growth in anticipation of the official release, especially from bridge models.

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Bibliographic Info

Paper provided by Banque de France in its series Working papers with number 401.

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Length: 27 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:bfr:banfra:401

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Web page: http://www.banque-france.fr/
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Keywords: GDP forecasting; Bridge models; Factor models.Threshold auto-regression; bounce-back effects; business cycles; inventory investment.;

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Cited by:
  1. Athanassios Petralias & Sotirios Petros & Pródromos Prodromídis, 2013. "Greece in Recession: Economic predictions, mispredictions and policy implications," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 75, Hellenic Observatory, LSE.
  2. A. Girardi & R. Golinelli & C. Pappalardo, 2014. "The Role of Indicator Selection in Nowcasting Euro Area GDP in Pseudo Real Time," Working Papers wp919, Dipartimento Scienze Economiche, Universita' di Bologna.

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