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Short-Term Forecasts of Euro Area GDP Growth

  • Elena Angelini
  • Gonzalo Camba-Mendez
  • Domenico Giannone
  • Lucrezia Reichlin
  • Gerhard Rünstler

This paper evaluates models that exploit timely monthly releases to compute early estimates of current quarter GDP (now-casting) in the euro area. We compare traditional methods used at institutions with a new method proposed by Giannone, Reichlin, and Small (2005). The method consists in bridging quarterly GDP with monthly data via a regression on factors extracted from a large panel of monthly series with different publication lags. We show that bridging via factors produces more accurate estimates than traditional bridge equations. We also show that survey data and other ‘soft’ information are valuable for now-casting.

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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/54097/1/RePEc_eca_wpaper_2008_035.pdf
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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number ECARES 2008-035.

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Length: 26 p.
Date of creation: Jun 2008
Date of revision:
Publication status: Published by:
Handle: RePEc:eca:wpaper:2008_035
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  1. Michael ARTIS & Anindya BANERJEE & Massimiliano MARCELLINO, 2001. "Factor Forecasts for the UK," Economics Working Papers ECO2001/15, European University Institute.
  2. Doz, Catherine & Giannone, Domenico & Reichlin, Lucrezia, 2011. "A two-step estimator for large approximate dynamic factor models based on Kalman filtering," Journal of Econometrics, Elsevier, vol. 164(1), pages 188-205, September.
  3. Doz, Catherine & Giannone, Domenico & Reichlin, Lucrezia, 2006. "A quasi maximum likelihood approach for large approximate dynamic factor models," Working Paper Series 0674, European Central Bank.
  4. Harvey, David & Leybourne, Stephen & Newbold, Paul, 1997. "Testing the equality of prediction mean squared errors," International Journal of Forecasting, Elsevier, vol. 13(2), pages 281-291, June.
  5. Diron, Marie, 2006. "Short-term forecasts of euro area real GDP growth: an assessment of real-time performance based on vintage data," Working Paper Series 0622, European Central Bank.
  6. Massimiliano Marcellino & James H. Stock & Mark W. Watson, . "Macroeconomic Forecasting in the Euro Area: Country Specific versus Area-Wide Information," Working Papers 201, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  7. D'Agostino, Antonello & Giannone, Domenico & Surico, Paolo, 2007. "(Un)Predictability and Macroeconomic Stability," CEPR Discussion Papers 6594, C.E.P.R. Discussion Papers.
  8. Karim Barhoumi & Szilard Benk & Riccardo Cristadoro & Ard Den Reijer & Audrone Jakaitiene & Piotr Jelonek & António Rua & Gerhard Rünstler & Karsten Ruth & Christophe Van Nieuwenhuyze, 2008. "Short-term forecasting of GDP using large monthly datasets - a pseudo real-time forecast evaluation exercise," Occasional Paper Series 84, European Central Bank.
  9. Jushan Bai & Serena Ng, 2000. "Determining the Number of Factors in Approximate Factor Models," Boston College Working Papers in Economics 440, Boston College Department of Economics.
  10. David F. Hendry & Michael P. Clements, 2004. "Pooling of forecasts," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 1-31, 06.
  11. Christian Schumacher, 2007. "Forecasting German GDP using alternative factor models based on large datasets," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 26(4), pages 271-302.
  12. Domenico Giannone & Lucrezia Reichlin & David H Small, 2007. "Nowcasting GDP and Inflation: The Real-Time Informational Content of Macroeconomic Data Releases," Money Macro and Finance (MMF) Research Group Conference 2006 164, Money Macro and Finance Research Group.
  13. Kitchen, John & Monaco, Ralph, 2003. "Real-Time Forecasting in Practice: The U.S. Treasury Staff's Real-Time GDP Forecast System," MPRA Paper 21068, University Library of Munich, Germany, revised Oct 2003.
  14. 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.
  15. Bańbura, Marta & Rünstler, Gerhard, 2011. "A look into the factor model black box: Publication lags and the role of hard and soft data in forecasting GDP," International Journal of Forecasting, Elsevier, vol. 27(2), pages 333-346.
  16. 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.
  17. Ard H.J. den Reijer, 2005. "Forecasting Dutch GDP using Large Scale Factor Models," DNB Working Papers 028, Netherlands Central Bank, Research Department.
  18. Rünstler, Gerhard & Sédillot, Franck, 2003. "Short-term estimates of euro area real GDP by means of monthly data," Working Paper Series 0276, European Central Bank.
  19. Tatiana Kirsanova, 2002. "Credibility of the Russian Stabilisation Programme in 1995-98," NIESR Discussion Papers 193, National Institute of Economic and Social Research.
  20. Duarte, Claudia & Rua, Antonio, 2007. "Forecasting inflation through a bottom-up approach: How bottom is bottom?," Economic Modelling, Elsevier, vol. 24(6), pages 941-953, November.
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