Robust Implementation of a Parsimonious Dynamic Factor Model to Nowcast GDP
Quarterly GDP figures usually are published with a delay of some weeks. A common way to generate GDP series of higher frequency, i.e. to nowcast GDP, is to use available indicators to calculate a single index by means of a common factor derived from a dynamic factor model (DFM). This paper deals with the implementation stage of this practice. We propose a two-tiered mechanism consisting in the identification of variables highly correlated with GDP as “core” indicators and a check of robustness of these variables in the sense of extreme bounds analysis. Accordingly selected indicators are used in an approximate DFM framework to exemplarily nowcast Spanish GDP growth. We show that our implementation produces more accurate nowcasts than both a benchmark stochastic process and the implementation based on the total set of core indicators.
|Date of creation:||2014|
|Date of revision:|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
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.:
- Bénédicte Vidaillet & V. D'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
- Elena Angelini & Gonzalo Camba‐Mendez & Domenico Giannone & Lucrezia Reichlin & Gerhard Rünstler, 2011.
"Short‐term forecasts of euro area GDP growth,"
Royal Economic Society, vol. 14(1), pages C25-C44, February.
- Angelini, Elena & Camba-Mendez, Gonzalo & Giannone, Domenico & Reichlin, Lucrezia & Rünstler, Gerhard, 2008. "Short-term Forecasts of Euro Area GDP Growth," CEPR Discussion Papers 6746, C.E.P.R. Discussion Papers.
- Elena Angelini & Gonzalo Camba-Mendez & Domenico Giannone & Lucrezia Reichlin & Gerhard Rünstler, 2008. "Short-Term Forecasts of Euro Area GDP Growth," Working Papers ECARES ECARES 2008-035, ULB -- Universite Libre de Bruxelles.
- Angelini, Elena & Camba-Méndez, Gonzalo & Giannone, Domenico & Rünstler, Gerhard & Reichlin, Lucrezia, 2008. "Short-term forecasts of euro area GDP growth," Working Paper Series 0949, European Central Bank.
- Maximo Camacho & Rafael Domenech, 2010.
"MICA-BBVA: A Factor Model of Economic and Financial Indicators for Short-term GDP Forecasting,"
1021, BBVA Bank, Economic Research Department.
- Máximo Camacho & Rafael Doménech, 2012. "MICA-BBVA: a factor model of economic and financial indicators for short-term GDP forecasting," SERIEs- Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 3(4), pages 475-497, December.
- Maximo Camacho & Gabriel Perez-Quiros, 2010.
"Introducing the euro-sting: Short-term indicator of euro area growth,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 25(4), pages 663-694.
- Camacho, Maximo & Pérez-Quirós, Gabriel, 2009. "Introducing the Euro-STING: Short-Term Indicator of Euro Area Growth," CEPR Discussion Papers 7343, C.E.P.R. Discussion Papers.
- Maximo Camacho & Gabriel Perez-Quiros, 2008. "Introducing the EURO-STING: Short Term INdicator of Euro Area Growth," Working Papers 0807, Banco de España;Working Papers Homepage.
- Edward E. Leamer, 1982.
"Let's Take the Con Out of Econometrics,"
UCLA Economics Working Papers
239, UCLA Department of Economics.
- Elena Angelini & Marta Banbura & Gerhard Rünstler, 2010.
"Estimating and forecasting the euro area monthly national accounts from a dynamic factor model,"
OECD Journal: Journal of Business Cycle Measurement and Analysis,
OECD Publishing,Centre for International Research on Economic Tendency Surveys, vol. 2010(1), pages 1-22.
- Angelini, Elena & Bańbura, Marta & Rünstler, Gerhard, 2008. "Estimating and forecasting the euro area monthly national accounts from a dynamic factor model," Working Paper Series 0953, European Central Bank.
- Roberto S. Mariano & Yasutomo Murasawa, 2003. "A new coincident index of business cycles based on monthly and quarterly series," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(4), pages 427-443.
- Breitung, Jörg & Eickmeier, Sandra, 2005.
"Dynamic factor models,"
Discussion Paper Series 1: Economic Studies
2005,38, Deutsche Bundesbank, Research Centre.
- Jennifer L. Castle & Nicholas W.P. Fawcett & David F. Hendry, 2009. "Nowcasting Is Not Just Contemporaneous Forecasting," National Institute Economic Review, National Institute of Economic and Social Research, vol. 210(1), pages 71-89, October.
- Jennifer L. Castle & David F. Hendry, 2010. "Nowcasting from disaggregates in the face of location shifts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(1-2), pages 200-214.
- Leamer, Edward E, 1985. "Sensitivity Analyses Would Help," American Economic Review, American Economic Association, vol. 75(3), pages 308-13, June.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4574. 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: (Klaus Wohlrabe)
If references are entirely missing, you can add them using this form.