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The value of hard and soft data for short-term forecasting of GDP

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  • Keeney, Mary

    (Central Bank of Ireland)

  • Kennedy, Bernard

    (Central Bank of Ireland)

  • Liebermann, Joelle

    (Central Bank of Ireland)

Abstract

When monitoring and assessing the state of the economy in real time, policymakers face the problem that Gross Domestic Product (GDP) is released with a lag. For the euro area, the first estimate of GDP for a reference quarter is only released six weeks after the close of the quarter. In the interim period, one can use monthly conjunctural indicators to obtain a more timely estimate of GDP. These indicators include hard data, such as industrial production, and soft data such as PMI surveys. However, the hard data for a reference month are only released with a one or two month lag, whereas the soft data are released at the end of the reference month. Hence, one faces a potential trade-off between reliability and timeliness of information. This letter illustrates the value of soft and hard data for computing an early GDP estimate by running a pseudo real-time forecasting exercise.

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Bibliographic Info

Paper provided by Central Bank of Ireland in its series Economic Letters with number 11/EL/12.

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Date of creation: Oct 2012
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Handle: RePEc:cbi:ecolet:11/el/12

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References

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  1. Domenico Giannone & Lucrezia Reichlin & Saverio Simonelli, 2009. "Nowcasting Euro Area Economic Activity in Real-Time: The Role of Confidence Indicator," Working Papers ECARES 2009_021, ULB -- Universite Libre de Bruxelles.
  2. Claudia Godbout & Jocelyn Jacob, 2010. "Le pouvoir de prévision des indices PMI," Discussion Papers 10-3, Bank of Canada.
  3. Banbura, Marta & Rünstler, Gerhard, 2007. "A look into the factor model black box: publication lags and the role of hard and soft data in forecasting GDP," Working Paper Series 0751, European Central Bank.
  4. Bańbura, Marta & Giannone, Domenico & Modugno, Michele & Reichlin, Lucrezia, 2013. "Now-casting and the real-time data flow," Working Paper Series 1564, European Central Bank.
  5. Liebermann, Joëlle, 2012. "Short-term forecasting of quarterly gross domestic product growth," Quarterly Bulletin Articles, Central Bank of Ireland, pages 74-84, February.
  6. Roberto S. Mariano & Yasutomo Murasawa, 2003. "A new coincident index of business cycles based on monthly and quarterly series," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(4), pages 427-443.
  7. Lombardi, Marco J. & Maier, Philipp, 2011. "Forecasting economic growth in the euro area during the Great Moderation and the Great Recession," Working Paper Series 1379, European Central Bank.
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