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An Unobserved Components Model to Forecast Austrian GDP

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Abstract

This paper deals with forecasting quarterly Austrian GDP growth using monthly conjunctural indicators and state space models. The latter provide an efficient econometric framework to analyse jointly data with different frequencies. Based on a Kalman filter technique we estimate a monthly GDP growth series as an unobserved component using monthly conjunctural indicators as explanatory variables. From a large data set of more than 150 monthly indicators the following six explanatory variables were selected on the basis of their in-sample fit and out of sample forecast performance: the ifo-index, credit growth, vacancies, the real exchange rate, the number of employees and new car registrations. Subsequently, quarterly GDP figures are derived from the monthly unobserved component using a weighted aggregation scheme. Several tests for forecasting accuracy and forecasting encompassing indicate that the unobserved components model (UOC-model) is able to outperform simple ARIMA and Naïve models.

Suggested Citation

  • Gerhard Fenz & Martin Spitzer, 2006. "An Unobserved Components Model to Forecast Austrian GDP," Working Papers 119, Oesterreichische Nationalbank (Austrian Central Bank).
    • Handle: RePEc:onb:oenbwp:119
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    1. Martin Schneider & Martin Spitzer, 2004. "Forecasting Austrian GDP using the generalized dynamic factor model," Working Papers 89, Oesterreichische Nationalbank (Austrian Central Bank).
    2. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
    3. repec:onb:oenbwp:y::i:89:b:1 is not listed on IDEAS
    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.
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    Cited by:

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    2. Konstantins Benkovskis, 2008. "Short-Term Forecasts of Latvia's Real Gross Domestic Product Growth Using Monthly Indicators," Working Papers 2008/05, Latvijas Banka.

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