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Nowcasting Ukraine's GDP Using a Factor-Augmented VAR (FAVAR) Model

Author

Listed:
  • Anton Grui

    () (National Bank of Ukraine)

  • Roman Lysenko

    () (National Bank of Ukraine)

Abstract

This article presents an approach for nowcasting the current value of Ukraine’s quarterly GDP. The approach uses leading indicators with a different disclosure frequency. We generalize data from a set of explanatory variables into several factors by using principal components analysis and estimate the factor-augmented VAR (FAVAR) model. Our system incorporates new data as they are published throughout a quarter to adjust GDP nowcasts. In addition, we research the influence of separate data releases on the accuracy of forecasts.

Suggested Citation

  • Anton Grui & Roman Lysenko, 2017. "Nowcasting Ukraine's GDP Using a Factor-Augmented VAR (FAVAR) Model," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 242, pages 5-13.
  • Handle: RePEc:ukb:journl:y:2017:i:242:p:5-13
    DOI: 10.26531/vnbu2017.242.005
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    File URL: https://journal.bank.gov.ua/en/article/2017/242/01
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    References listed on IDEAS

    as
    1. Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia, 2005. "The Generalized Dynamic Factor Model: One-Sided Estimation and Forecasting," Journal of the American Statistical Association, American Statistical Association, vol. 100, pages 830-840, September.
    2. Kapetanios, George, 2004. "A note on modelling core inflation for the UK using a new dynamic factor estimation method and a large disaggregated price index dataset," Economics Letters, Elsevier, vol. 85(1), pages 63-69, October.
    3. Porshakov, A. & Ponomarenko, A. & Sinyakov, A., 2016. "Nowcasting and Short-Term Forecasting of Russian GDP with a Dynamic Factor Model," Journal of the New Economic Association, New Economic Association, vol. 30(2), pages 60-76.
    4. repec:bof:bofitp:urn:nbn:fi:bof-201506091268 is not listed on IDEAS
    5. Cristadoro, Riccardo & Forni, Mario & Reichlin, Lucrezia & Veronese, Giovanni, 2001. "A Core Inflation Index for the Euro Area," CEPR Discussion Papers 3097, C.E.P.R. Discussion Papers.
    6. Stock, James H. & Watson, Mark W., 2006. "Forecasting with Many Predictors," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 1, chapter 10, pages 515-554, Elsevier.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Principal components; nowcasting; factor model;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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