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Short term forecasts of economic activity: are fortnightly factors useful?

Author

Listed:
  • Libero Monteforte

    () (Bank of Italy)

  • Valentina Raponi

    () (Imperial College London and Sapienza University of Rome)

Abstract

A short term mixed-frequency model is proposed to estimate and forecast the Italian economic activity fortnightly. Building on Frale et al. (2011), we introduce a dynamic factor model with three frequencies (quarterly, monthly and fortnightly), by selecting indicators that show significant coincident and leading properties and are representative of both demand and supply. We find that high-frequency indicators improve the real time forecasts of Italian GDP. Moreover, the model provides a new fortnightly indicator of GDP, consistent with the official quarterly series. Our results emphasize the potential benefit of the high frequency series, providing forecasting gains beyond those based on monthly variables alone.

Suggested Citation

  • Libero Monteforte & Valentina Raponi, 2018. "Short term forecasts of economic activity: are fortnightly factors useful?," Temi di discussione (Economic working papers) 1177, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_1177_18
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    factor models; Kalman filter; temporal disaggregation; mixed frequency data; forecasting;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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