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Nowcasting BRIC+M in real time

Author

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  • Dahlhaus, Tatjana
  • Guénette, Justin-Damien
  • Vasishtha, Garima

Abstract

Given the growing importance of emerging market economies (EMEs) in driving global GDP growth, timely and accurate assessments of current and future economic activity in EMEs are important for policy-makers not only in these countries, but also in advanced economies. This paper uses state-of-the-art dynamic factor models (DFMs) to nowcast real GDP growth for Brazil, Russia, India, China, and Mexico (“BRIC+M”). The DFM framework is particularly suitable for EMEs, as it enables the efficient handling of data series that are characterized by different publication lags, frequencies, and sample lengths. It also allows the extraction of model-based “news” from a data release and the assessment of the impact of such “news” on nowcast revisions. Overall, we find that the DFMs generally display a good directional accuracy and provide reliable nowcasts for GDP growth. Furthermore, the “news” pertaining to domestic indicators is the main driver of changes in nowcast revisions, while exogenous variables play a relatively minor role.

Suggested Citation

  • Dahlhaus, Tatjana & Guénette, Justin-Damien & Vasishtha, Garima, 2017. "Nowcasting BRIC+M in real time," International Journal of Forecasting, Elsevier, vol. 33(4), pages 915-935.
  • Handle: RePEc:eee:intfor:v:33:y:2017:i:4:p:915-935
    DOI: 10.1016/j.ijforecast.2017.05.002
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    5. Tony Chernis & Rodrigo Sekkel, 2017. "A dynamic factor model for nowcasting Canadian GDP growth," Empirical Economics, Springer, vol. 53(1), pages 217-234, August.
    6. Modugno, Michele & Soybilgen, Barış & Yazgan, Ege, 2016. "Nowcasting Turkish GDP and news decomposition," International Journal of Forecasting, Elsevier, vol. 32(4), pages 1369-1384.
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    11. Daniela Bragoli & Jack Fosten, 2018. "Nowcasting Indian GDP," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 80(2), pages 259-282, April.
    12. Kaufmann, Daniel & Scheufele, Rolf, 2017. "Business tendency surveys and macroeconomic fluctuations," International Journal of Forecasting, Elsevier, vol. 33(4), pages 878-893.
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    More about this item

    Keywords

    Dynamic factor model; Nowcasting; Real-time data; Emerging markets;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal 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

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