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Nowcasting norwegian GDP: the role of asset prices in a small open economy

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  • Knut Aastveit

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  • Tørres Trovik

Abstract

This paper finds that asset prices on Oslo Stock Exchange is the single most important block of data to improve estimates of current quarter GDP in Norway. Other important blocks of data are labor market data and industrial production indicators. We use an approximate dynamic factor model that is able to handle new information as it is released, thus the marginal impact on mean square nowcasting error can be studied for a large number of variables. We use a panel of 148 non-synchronous variables covering a broad spectrum of the Norwegian economy. The strong impact from financial data is due to an ability of the market clearing process to impart information about the real activity in Norway in a timely manner.
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Suggested Citation

  • Knut Aastveit & Tørres Trovik, 2012. "Nowcasting norwegian GDP: the role of asset prices in a small open economy," Empirical Economics, Springer, vol. 42(1), pages 95-119, February.
  • Handle: RePEc:spr:empeco:v:42:y:2012:i:1:p:95-119
    DOI: 10.1007/s00181-010-0429-9
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    More about this item

    Keywords

    Forecasting; Financial markets; Monetary policy; Factor models; Small open economy; C33; C53; E52; G14;

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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