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New Monthly Estimation Approach for Nowcasting GDP Growth: The Case of Japan

Author

Listed:
  • Naoko Hara

    (Bank of Japan)

  • Shotaro Yamane

    (Bank of Japan)

Abstract

This paper proposes a new approach for nowcasting as yet unavailable GDP growth by estimating monthly GDP growth with a large dataset. The model consists of two parts: (i) a few indicators that explain a large part of the variation in GDP growth, and (ii) principal components, which are orthogonal to those indicators and are extracted from a number of GDP source data, capturing the rest of the variation. The approach relies on a static factor model comprising a number of indicators that have a simultaneous relationship with GDP. Applying this approach to data for Japan, we find that our model produces more precise estimates of recent GDP growth at an earlier stage of nowcasting than the nowcasts of professional forecasters.

Suggested Citation

  • Naoko Hara & Shotaro Yamane, 2013. "New Monthly Estimation Approach for Nowcasting GDP Growth: The Case of Japan," Bank of Japan Working Paper Series 13-E-14, Bank of Japan.
    • Handle: RePEc:boj:bojwps:13-e-14
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    File URL: http://www.boj.or.jp/en/research/wps_rev/wps_2013/data/wp13e14.pdf
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    Citations

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    Cited by:

    1. Fumio Hayashi & Yuta Tachi, 2023. "Nowcasting Japan’s GDP," Empirical Economics, Springer, vol. 64(4), pages 1699-1735, April.
    2. Kakuho Furukawa & Ryohei Hisano, 2022. "A Nowcasting Model of Exports Using Maritime Big Data," Bank of Japan Working Paper Series 22-E-19, Bank of Japan.
    3. Takashi Nakazawa, 2022. "Constructing GDP Nowcasting Models Using Alternative Data," Bank of Japan Working Paper Series 22-E-9, Bank of Japan.
    4. Kyosuke Chikamatsu, Naohisa Hirakata, Yosuke Kido, Kazuki Otaka, 2018. "Nowcasting Japanese GDPs," Bank of Japan Working Paper Series 18-E-18, Bank of Japan.
    5. Chikamatsu, Kyosuke & Hirakata, Naohisa & Kido, Yosuke & Otaka, Kazuki, 2021. "Mixed-frequency approaches to nowcasting GDP: An application to Japan," Japan and the World Economy, Elsevier, vol. 57(C).
    6. Urasawa, Satoshi, 2014. "Real-time GDP forecasting for Japan: A dynamic factor model approach," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 116-134.

    More about this item

    Keywords

    Factor Models; Forecasting; Nowcasting; Monthly GDP; Real-time Data;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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