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Exploiting the monthly data-flow in structural forecasting

Listed author(s):
  • Domenico Giannone

    ()

    (Libera Università Internazionale degli Studi Sociali Guido Carli (LUISS)
    Centre for Economic Policy Research (CEPR))

  • Francesca Monti

    ()

    (Bank of England
    Centre for Macroeconomics (CFM))

  • Lucrezia Reichlin

    ()

    (London Business School (LBS)
    Centre for Economic Policy Research (CEPR))

This paper shows how and when it is possible to obtain a mapping from a quarterly DSGE model to a monthly specification that maintains the same economic restrictions and has real coefficients. We use this technique to derive the monthly counterpart of the Gali et al (2011) model. We then augment it with auxiliary macro indicators which, because of their timeliness, can be used to obtain a now-cast of the structural model. We show empirical results for the quarterly growth rate of GDP, the monthly unemployment rate and the welfare relevant output gap defined in Gali, Smets and Wouters (2011). Results show that the augmented monthly model does best for now-casting.

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File URL: http://www.centreformacroeconomics.ac.uk/Discussion-Papers/2014/CFMDP2014-16-Paper.pdf
File Function: First version, 2014
Download Restriction: no

Paper provided by Centre for Macroeconomics (CFM) in its series Discussion Papers with number 1416.

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Length: 23 pages
Date of creation: Jun 2014
Handle: RePEc:cfm:wpaper:1416
Contact details of provider: Web page: http://www.centreformacroeconomics.ac.uk/

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  1. Ellen R. McGrattan & Patrick J. Kehoe & V. V. Chari, 2008. "New Keynesian models: not yet useful for policy analysis," Working Papers 664, Federal Reserve Bank of Minneapolis.
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  3. Francesca Monti, 2010. "Combining Judgment and Models," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(8), pages 1641-1662, December.
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  5. 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.
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  7. Jing Cynthia Wu & Fan Dora Xia, 2016. "Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 253-291, 03.
  8. Jordi Galí & Frank Smets & Rafael Wouters, 2012. "Unemployment in an Estimated New Keynesian Model," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 329-360.
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  14. Francis X. Diebold & Robert S. Mariano, 1994. "Comparing Predictive Accuracy," NBER Technical Working Papers 0169, National Bureau of Economic Research, Inc.
  15. Domenico Giannone & Lucrezia Reichlin & David H. Small, 2005. "Nowcasting GDP and inflation: the real-time informational content of macroeconomic data releases," Finance and Economics Discussion Series 2005-42, Board of Governors of the Federal Reserve System (U.S.).
  16. Julio Rotemberg & Michael Woodford, 1997. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 297-361 National Bureau of Economic Research, Inc.
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  18. Marco Del Negro & Frank Schorfheide, 2004. "Priors from General Equilibrium Models for VARS," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 643-673, 05.
  19. Claudia Foroni & Massimiliano Marcellino, 2013. "Mixed frequency structural models: estimation, and policy analysis," Working Paper 2013/15, Norges Bank.
  20. Nir Jaimovich & Sergio Rebelo, 2006. "Can News About the Future Drive the Business Cycle?," NBER Working Papers 12537, National Bureau of Economic Research, Inc.
  21. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Editor's Choice Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 131(4), pages 1593-1636.
  22. Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000. "The generalised dynamic factor model: identification and estimation," ULB Institutional Repository 2013/10143, ULB -- Universite Libre de Bruxelles.
  23. Christoffel, Kai & Coenen, Günter & Warne, Anders, 2008. "The New Area-Wide Model of the euro area: a micro-founded open-economy model for forecasting and policy analysis," Working Paper Series 0944, European Central Bank.
  24. Domenico Giannone & Martha Banbura & Lucrezia Reichlin, 2008. "Bayesian VARs with large panels," ULB Institutional Repository 2013/13388, ULB -- Universite Libre de Bruxelles.
  25. Jean Boivin & Marc Giannoni, 2006. "DSGE Models in a Data-Rich Environment," NBER Working Papers 12772, National Bureau of Economic Research, Inc.
  26. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  27. Marianna Cervená & Martin Schneider, 2010. "Short-term forecasting GDP with a DSGE model augmented by monthly indicators," Working Papers 163, Oesterreichische Nationalbank (Austrian Central Bank).
  28. Bent Jesper Christensen & Olaf Posch & Michel van der Wel, 2011. "Estimating Dynamic Equilibrium Models using Macro and Financial Data," CREATES Research Papers 2011-21, Department of Economics and Business Economics, Aarhus University.
  29. Červená, Marianna & Schneider, Martin, 2014. "Short-term forecasting of GDP with a DSGE model augmented by monthly indicators," International Journal of Forecasting, Elsevier, vol. 30(3), pages 498-516.
  30. Anderson, Brian D.O. & Deistler, Manfred & Felsenstein, Elisabeth & Funovits, Bernd & Koelbl, Lukas & Zamani, Mohsen, 2016. "Multivariate Ar Systems And Mixed Frequency Data: G-Identifiability And Estimation," Econometric Theory, Cambridge University Press, vol. 32(04), pages 793-826, August.
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