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Short-Term Forecasting of Czech Quarterly GDP Using Monthly Indicators

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Abstract

The authors evaluate the out-of-sample forecasting performance of six competing models at horizons of up to three quarters ahead in a pseudo-real time setup. All the models use information in monthly indicators released ahead of quarterly GDP. The authors estimate two models – averaged vector autoregressions and bridge equations – relying on just a few monthly indicators. The remaining four models condition the forecast on a large set of monthly series. These models comprise two standard principal components models, a dynamic factor model based on the Kalman smoother, and a generalized dynamic factor model. The authors benchmark their results to the performance of a naive model and the historical near-term forecasts of the Czech National Bank’s staff. The findings are also compared with a related study conducted by ECB staff (Barhoumi et al., 2008). In the Czech case, standard principal components is the most precise model overall up to three quarters ahead. However, the CNB staff’s historical forecasts were the most accurate one quarter ahead.

Suggested Citation

  • Katerina Arnostova & David Havrlant & Luboš Rùžièka & Peter Tóth, 2011. "Short-Term Forecasting of Czech Quarterly GDP Using Monthly Indicators," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(6), pages 566-583, December.
  • Handle: RePEc:fau:fauart:v:61:y:2011:i:6:p:566-583
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    More about this item

    Keywords

    GDP forecasting; bridge models; principal components; dynamic factor models; real-time evaluation;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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