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Short-term forecasts of euro area real GDP growth: an assessment of real-time performance based on vintage data

  • Marie Diron

    (Oxford Economics, London, UK)

Forecasters commonly predict real gross domestic product growth from monthly indicators such as industrial production, retail sales and surveys, and therefore require an assessment of the reliability of such tools. While forecast errors related to model specification and unavailability of data in real time have been assessed, the impact of data revisions on forecast accuracy has seldom been evaluated, especially for the euro area. This paper proposes to evaluate the contributions of these three sources of forecast error using a set of data vintages for the euro area. The results show that gains in accuracy of forecasts achieved by using monthly data on actual activity rather than surveys or financial indicators are offset by the fact that the former set of monthly data is harder to forecast and less timely than the latter set. These results provide a benchmark which future research may build on as more vintage datasets become available. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/for.1067
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

Volume (Year): 27 (2008)
Issue (Month): 5 ()
Pages: 371-390

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Handle: RePEc:jof:jforec:v:27:y:2008:i:5:p:371-390
DOI: 10.1002/for.1067
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966

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  1. Athanasios Orphanides & Simon van Norden, 2001. "The Unreliability of Output Gap Estimates in Real Time," CIRANO Working Papers 2001s-57, CIRANO.
  2. Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 253-63, July.
  3. Baffigi, Alberto & Golinelli, Roberto & Parigi, Giuseppe, 2004. "Bridge models to forecast the euro area GDP," International Journal of Forecasting, Elsevier, vol. 20(3), pages 447-460.
  4. Dean Croushore & Tom Stark, 1999. "A real-time data set for macroeconomists," Working Papers 99-4, Federal Reserve Bank of Philadelphia.
  5. Mario Forno & Marco Lippi & Lucrezia Reichlin & Filippo Altissimo & Antonio Bassanetti, 2003. "Eurocoin: A Real Time Coincident Indicator Of The Euro Area Business Cycle," Computing in Economics and Finance 2003 242, Society for Computational Economics.
  6. Harvey, David & Leybourne, Stephen & Newbold, Paul, 1997. "Testing the equality of prediction mean squared errors," International Journal of Forecasting, Elsevier, vol. 13(2), pages 281-291, June.
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