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Nowcasting global economic growth: A factor‐augmented mixed‐frequency approach

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  • Laurent Ferrara
  • Clément Marsilli

Abstract

Assessing accurately global economic conditions is a great challenge for economists. The International Monetary Fund proposes within its periodic World Economic Outlook report a measure of the global GDP annual growth, that is generally considered as the benchmark nowcast by macroeconomists. In this paper, we put forward an alternative approach to provide monthly nowcasts of the annual global growth rate. Our approach builds on a Factor‐Augmented MIxed DAta Sampling (FA‐MIDAS) model that enables: (i) to account for a large monthly database including various countries and sectors of the global economy and (ii) to nowcast a low‐frequency macroeconomic variable using higher frequency information. Pseudo‐real‐time results over the period 2010–16 show that this approach provides reliable and timely nowcasts of the world GDP annual growth on a monthly basis.

Suggested Citation

  • Laurent Ferrara & Clément Marsilli, 2019. "Nowcasting global economic growth: A factor‐augmented mixed‐frequency approach," The World Economy, Wiley Blackwell, vol. 42(3), pages 846-875, March.
    • Handle: RePEc:bla:worlde:v:42:y:2019:i:3:p:846-875
    DOI: 10.1111/twec.12708
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    JEL classification:

    • 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

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