IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Nowcasting GDP in Real-Time: A Density Combination Approach

Listed author(s):
  • Knut Are Aastveit

    ()

  • Karsten R. Gerdrup

    ()

  • Anne Sofie Jore

    ()

  • Leif Anders Thorsrud

    ()

In this paper we use U.S. real-time vintage data and produce combined density nowcasts for quarterly GDP growth from a system of three commonly used model classes. The density nowcasts are combined in two steps. First, a wide selection of individual models within each model class are combined separately. Then, the nowcasts from the three model classes are combined into a single predictive density. We update the density now-cast for every new data release throughout the quarter, and highlight the importance of new information for the evaluation period 1990Q2-2010Q3. Our results show that the logarithmic score of the predictive densities for U.S. GDP increase almost monotonically as new information arrives during the quarter. While the best performing model class is changing during the quarter, the density nowcasts from our combination framework is always performing well both in terms of logarithmic scores and calibration tests. The density combination approach is superior to a simple model selection strategy and also performs better in terms of point forecast evaluation than standard point forecast combinations.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://www.bi.edu/globalassets/forskning/camp/working-papers/2011/camp_wp_01-2011.pdf
Download Restriction: no

Paper provided by Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School in its series Working Papers with number 0003.

as
in new window

Length: 45 pages
Date of creation: Sep 2011
Handle: RePEc:bny:wpaper:0003
Contact details of provider: Postal:
Nydalsveien 37, N-0442 Oslo

Phone: +47 06600
Web page: http://www.bi.no/camp/
Email:


More information through EDIRC

References listed on IDEAS
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.:

as
in new window


  1. Chiara Scotti & S.Boragan Aruoba & Francis X. Diebold & University of Maryland, 2006. "Real-Time Measurement of Business Conditions," Computing in Economics and Finance 2006 387, Society for Computational Economics.
  2. James Mitchell & Stephen G. Hall, 2005. "Evaluating, Comparing and Combining Density Forecasts Using the KLIC with an Application to the Bank of England and NIESR 'Fan' Charts of Inflation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(s1), pages 995-1033, December.
  3. Elena Angelini & Gonzalo Camba‐Mendez & Domenico Giannone & Lucrezia Reichlin & Gerhard Rünstler, 2011. "Short‐term forecasts of euro area GDP growth," Econometrics Journal, Royal Economic Society, vol. 14, pages 25-44, 02.
  4. Hilde C. Bjørnland & Karsten R. Gerdrup & Anne Sofie Jore & Leif Anders Thorsrud & Christie Smith, 2010. "Does forecast combination improve Norges Bank inflation forecasts?," Working Papers 0002, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
  5. Tom Stark and Dean Croushore, 2001. "Forecasting with a Real-Time Data Set for Macroeconomists," Computing in Economics and Finance 2001 258, Society for Computational Economics.
  6. Todd E. Clark & Michael W. McCracken, 2009. "Improving Forecast Accuracy By Combining Recursive And Rolling Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 363-395, 05.
  7. repec:nsr:niesrd:342 is not listed on IDEAS
  8. K. Barhoumi & S. Benk & R. Cristadoro & A. Den Reijer & A. Jakaitiene & P. Jelonek & A. Rua & K. Ruth & C. Van Nieuwenhuyze & G. Rünstler, 2008. "Short-term forecasting of GDP using large monthly datasets – A pseudo real-time forecast evaluation exercise," Working Paper Research 133, National Bank of Belgium.
  9. Banerjee, Anindya & Marcellino, Massimiliano & Masten, Igor, 2003. "Leading Indicators for Euro Area Inflation and GDP Growth," CEPR Discussion Papers 3893, C.E.P.R. Discussion Papers.
  10. Aiolfi, Marco & Timmermann, Allan, 2006. "Persistence in forecasting performance and conditional combination strategies," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 31-53.
  11. Anindya BANERJEE & Massimiliano MARCELLINO, 2002. "Are There Any Reliable Leading Indicators for US Inflation and GDP Growth?," Economics Working Papers ECO2002/21, European University Institute.
  12. Martin D. D. Evans(Georgetown University and NBER), 2005. "Where Are We Now? Real-time Estimates of the Macro Economy," Working Papers gueconwpa~05-05-02, Georgetown University, Department of Economics.
  13. Garratt, Anthony & Mitchell, James & Vahey, Shaun, 2010. "Measuring Output Gap Uncertainty," CEPR Discussion Papers 7742, C.E.P.R. Discussion Papers.
  14. Wallis, Kenneth F., 2003. "Chi-squared tests of interval and density forecasts, and the Bank of England's fan charts," International Journal of Forecasting, Elsevier, vol. 19(2), pages 165-175.
  15. Gianni Amisano & Raffaella Giacomini, 2005. "Comparing Density Forecsts via Weighted Likelihood Ratio Tests," Working Papers ubs0504, University of Brescia, Department of Economics.
  16. repec:nsr:niesrd:368 is not listed on IDEAS
  17. Giannone, Domenico & Reichlin, Lucrezia & Small, David, 2008. "Nowcasting: The real-time informational content of macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 665-676, May.
  18. G. Rünstler & K. Barhoumi & S. Benk & R. Cristadoro & A. Den Reijer & A. Jakaitiene & P. Jelonek & A. Rua & K. Ruth & C. Van Nieuwenhuyze, 2009. "Short-term forecasting of GDP using large datasets: a pseudo real-time forecast evaluation exercise," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 28(7), pages 595-611.
  19. Geweke, John & Amisano, Gianni, 2011. "Optimal prediction pools," Journal of Econometrics, Elsevier, vol. 164(1), pages 130-141, September.
  20. Karsten R. Gerdrup & Anne Sofie Jore & Christie Smith & Leif Anders Thorsrud, 2009. "Evaluating ensemble density combination - forecasting GDP and inflation," Working Paper 2009/19, Norges Bank.
  21. Marcellino, Massimiliano, 2006. "Leading Indicators," Handbook of Economic Forecasting, Elsevier.
  22. Dr. James Mitchell, 2009. "Measuring Output Gap Uncertainty," NIESR Discussion Papers 342, National Institute of Economic and Social Research.
  23. Ida Wolden Bache & Anne Sofie Jore & James Mitchell & Shaun P. Vahey, 2009. "Combining VAR and DSGE forecast densities," Working Paper 2009/23, Norges Bank.
  24. Christian Kascha & Francesco Ravazzolo, 2008. "Combining inflation density forecasts," Working Paper 2008/22, Norges Bank.
  25. Marco Aiolfi & Carlos Capistrán & Allan Timmermann, 2010. "Forecast Combinations," Working Papers 2010-04, Banco de México.
  26. Todd E. Clark & Michael W. McCracken, 2007. "Averaging forecasts from VARs with uncertain instabilities," Finance and Economics Discussion Series 2007-42, Board of Governors of the Federal Reserve System (U.S.).
  27. repec:nsr:niesrd:320 is not listed on IDEAS
  28. Croushore, Dean, 2006. "Forecasting with Real-Time Macroeconomic Data," Handbook of Economic Forecasting, Elsevier.
  29. Faust, Jon & Wright, Jonathan H., 2009. "Comparing Greenbook and Reduced Form Forecasts Using a Large Realtime Dataset," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(4), pages 468-479.
  30. Carlos Capistrán & Allan Timmermann, 2008. "Forecast Combination With Entry and Exit of Experts," CREATES Research Papers 2008-55, Department of Economics and Business Economics, Aarhus University.
  31. Anne-Sofie Jore & James Mitchell & Shaun P. Vahey, 2008. "Combining forecast densities from VARs with uncertain instabilities," Working Paper 2008/01, Norges Bank.
  32. Gneiting, Tilmann, 2011. "Making and Evaluating Point Forecasts," Journal of the American Statistical Association, American Statistical Association, vol. 106(494), pages 746-762.
  33. Berkowitz, Jeremy, 2001. "Testing Density Forecasts, with Applications to Risk Management," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 465-474, October.
  34. Dr. James Mitchell, 2005. "Evaluating, comparing and combining density forecasts using the KLIC with an application to the Bank of England and NIESR ÔfanÕ charts of inflation," NIESR Discussion Papers 253, National Institute of Economic and Social Research.
  35. Dean Croushore & Tom Stark, 1999. "A real-time data set for macroeconomists," Working Papers 99-4, Federal Reserve Bank of Philadelphia.
  36. Valentina Corradi & Norman Swanson, 2004. "Predictive Density Evaluation," Departmental Working Papers 200419, Rutgers University, Department of Economics.
  37. Clemen, Robert T., 1989. "Combining forecasts: A review and annotated bibliography," International Journal of Forecasting, Elsevier, vol. 5(4), pages 559-583.
  38. Hall, Stephen G. & Mitchell, James, 2007. "Combining density forecasts," International Journal of Forecasting, Elsevier, vol. 23(1), pages 1-13.
  39. Stark, Tom & Croushore, Dean, 2002. "Reply to the comments on 'Forecasting with a real-time data set for macroeconomists'," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 563-567, December.
  40. Baffigi, Alberto & Golinelli, Roberto & Parigi, Giuseppe, 2004. "Bridge models to forecast the euro area GDP," International Journal of Forecasting, Elsevier, vol. 20(3), pages 447-460.
  41. David H. Romer & Christina D. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, vol. 90(3), pages 429-457, June.
  42. Diebold, Francis X & Gunther, Todd A & Tay, Anthony S, 1998. "Evaluating Density Forecasts with Applications to Financial Risk Management," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 863-883, November.
  43. Valentina Corradi & Norman Swanson, 2006. "Predictive Density Evaluation. Revised," Departmental Working Papers 200621, Rutgers University, Department of Economics.
  44. Mark W. Watson & James H. Stock, 2004. "Combination forecasts of output growth in a seven-country data set," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(6), pages 405-430.
  45. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  46. Bénédicte Vidaillet & V. D'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bny:wpaper:0003. 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: (Synne Sandnes)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.