The use of preliminary data in econometric forecasting: an application with the Bank of Italy Quarterly Model
This paper considers forecasting by econometric and time series models using preliminary (or provisional) data. The standard practice is to ignore the distinction between provisional and final data. We call the forecasts that ignore such a distinction naive forecasts, which are generated as projections from a correctly specified model using the most recent estimates of the unobserved final figures. It is first shown that in dynamic models a multistepahead naive forecast can achieve a lower mean square error than a single-step-ahead one, intuitively because it is less affected by the measurement noise embedded in the preliminary observations. The best forecasts are obtained by combining, in an optimal way, the information provided by the model with the new information contained in the preliminary data. This can be done in the state space framework, as suggested in the literature. Here we consider two simple methods to combine, in general suboptimally, the two sources of information: modifying the forecast initial conditions via standard regressions and using intercept corrections. The issues are explored with reference to the Italian national accounts data and the Bank of Italy Quarterly Econometric Model (BIQM). A series of simulation experiments with the model show that these methods are quite effective in reducing the extra volatility of prediction due to the use of preliminary data.
|Date of creation:||Dec 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.bancaditalia.it
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Faust, Jon & Rogers, John H & Wright, Jonathan H, 2005.
"News and Noise in G-7 GDP Announcements,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 37(3), pages 403-19, June.
- A. C. Harvey & Siem Jan Koopman, 2000.
"Computing Observation Weights for Signal Extraction and Filtering,"
Econometric Society World Congress 2000 Contributed Papers
0888, Econometric Society.
- Koopman, Siem Jan & Harvey, Andrew, 2003. "Computing observation weights for signal extraction and filtering," Journal of Economic Dynamics and Control, Elsevier, vol. 27(7), pages 1317-1333, May.
- Howrey, E Philip, 1984. "Data Revision, Reconstruction, and Prediction: An Application to Inventory Investment," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 386-93, August.
- Guiso, Luigi & Pistaferri, Luigi & Schivardi, Fabiano, 2001.
"Insurance Within the Firm,"
CEPR Discussion Papers
2793, C.E.P.R. Discussion Papers.
- Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2001. "Insurance within the Firm," Temi di discussione (Economic working papers) 414, Bank of Italy, Economic Research and International Relations Area.
- Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2002. "Insurance within the firm," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C3-1, International Conferences on Panel Data.
- Trivellato, Ugo & Rettore, Enrico, 1986. "Preliminary Data Errors and Their Impact on the Forecast Error of Simultaneous-Equations Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(4), pages 445-53, October.
- Stefano Siviero & Daniele Terlizzese, 2001.
"Macroeconomic forecasting: Debunking a few old wives' tales,"
Temi di discussione (Economic working papers)
395, Bank of Italy, Economic Research and International Relations Area.
- Stefano Siviero & Daniele Terlizzese, 2007. "Macroeconomic Forecasting: Debunking a Few Old Wives' Tales," Journal of Business Cycle Measurement and Analysis, OECD Publishing,Centre for International Research on Economic Tendency Surveys, vol. 2007(3), pages 287-316.
- Howrey, E Philip, 1978. "The Use of Preliminary Data in Econometric Forecasting," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 193-200, May.
- Patterson, K. D., 2000. "Which vintage of data to use when there are multiple vintages of data?: Cointegration, weak exogeneity and common factors," Economics Letters, Elsevier, vol. 69(2), pages 115-121, November.
- N. Gregory Mankiw & Matthew D. Shapiro, 1986. "News or Noise? An Analysis of GNP Revisions," NBER Working Papers 1939, National Bureau of Economic Research, Inc.
- Giampiero M. Gallo & Massimiliano Marcellino, . "Ex Post and Ex Ante Analysis of Provisional Data," Working Papers 141, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
When requesting a correction, please mention this item's handle: RePEc:bdi:wptemi:td_437_01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.