Nowcasting of the Gross Regional Product
Business cycles are usually defined at a national level. The implicit assumption being that it affects all regions similarly. This is combined with a lack of timely information on regional economic development as annual values of the gross regional product (GRP) are often published with up to two years lag. The present paper evaluates a method of obtaining values of the GRP as soon as monthly and quarterly business cycle indicators become available. Building on earlier work on using bridge equations to obtaining quarterly values of GDP growth, a method is proposed were annual GRP growth is estimated using a large number of business cycle indicators. The procedure is applied to data for the Northern regions of Sweden. With the present method it is possible to continuously refine GRP growth values throughout the year. By utilizing the information content in available business cycle indicators, a nowcast of the GRP is obtained as opposed to a pure forecast based solely on past information. Nowcasts will then provide valuable information on how current highs or lows are affecting different regions.
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