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An Economic Framework to Nowcast Low-Frequency Data

Author

Listed:
  • Irfan Qureshi

    (Asian Development Bank)

  • Arief Ramayandi

    (Asian Development Bank Institute)

  • Ghufran Ahmad

    (Cardiff University)

Abstract

Standard nowcasting frameworks commonly use weekly or monthly variables to monitor quarterly gross domestic product (GDP). However, this method is not suitable for economies that track GDP annually. We modify the state-space representation of an otherwise standard dynamic factor model to represent annual variables as a linear combination of latent monthly indicators for more frequently released variables. Using data from a lower middle-income country, we derive a monthly activity measure that effectively tracks annual GDP growth. These estimates outperform institutional forecasts and competing approaches to estimate low-frequency data. The model offers broader applications to countries facing data limitations, especially lower-income countries

Suggested Citation

  • Irfan Qureshi & Arief Ramayandi & Ghufran Ahmad, 2025. "An Economic Framework to Nowcast Low-Frequency Data," ADB Economics Working Paper Series 800, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:021542
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    File URL: https://www.adb.org/publications/nowcast-low-frequency-data
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    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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