Forecasting GDP growth in times of crisis: private sector forecasts versus statistical models
AbstractThis paper examines the accuracy of short run forecasts of Dutch GDP growth by several linear statistical models and private sector analysts. We focus on the financial crisis of 2008-2009 and the dot-com recession of 2001-2002. The dynamic factor model turns out to be the best model. Its forecast accuracy during the crisis deteriorates much less than that of the other linear models and hardly at all when backcasting and nowcasting. Moreover, the dynamic factor model beats the private sector forecasters at nowcasting. This finding suggests that adding judgement to a mechanical model may not improve short-term forecasting performance.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 320.
Date of creation: Nov 2011
Date of revision:
Nowcasting; Professional Forecasters; Factor Model; Forecasting;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-14 (All new papers)
- NEP-CBA-2011-11-14 (Central Banking)
- NEP-FDG-2011-11-14 (Financial Development & Growth)
- NEP-FOR-2011-11-14 (Forecasting)
- NEP-MAC-2011-11-14 (Macroeconomics)
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- Falk Brauning & Siem Jan Koopman, 2012. "Forecasting Macroeconomic Variables using Collapsed Dynamic Factor Analysis," Tinbergen Institute Discussion Papers 12-042/4, Tinbergen Institute.
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