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Nowcasting Norwegian GDP: The role of asset prices in a small open economy

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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File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2007/WP-20079/
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Paper provided by Norges Bank in its series Working Paper with number 2007/09.

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Length: 28 pages
Date of creation: 11 Jan 2008
Date of revision:
Handle: RePEc:bno:worpap:2007_09
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  23. Schumacher, Christian & Breitung, Jörg, 2008. "Real-time forecasting of German GDP based on a large factor model with monthly and quarterly data," International Journal of Forecasting, Elsevier, vol. 24(3), pages 386-398.
  24. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
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