The Role of Indicator Selection in Nowcasting Euro Area GDP in Pseudo Real Time

Girardi, Alessandro ; Golinelli, Roberto ; Pappalardo, Carmine (2014) The Role of Indicator Selection in Nowcasting Euro Area GDP in Pseudo Real Time. Bologna: Dipartimento di Scienze economiche DSE, p. 59. DOI 10.6092/unibo/amsacta/3931. In: Quaderni - Working Paper DSE (919). ISSN 2282-6483.
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Abstract

Building on the literature on regularization and dimension reduction methods, we have developed a quarterly forecasting model for euro area GDP. This method consists in bridging quarterly national accounts data using factors extracted from a large panel of monthly and quarterly series including business surveys and financial indicators. The pseudo real-time nature of the information set is accounted for as the pattern of publication lags is considered. Forecast evaluation exercises show that predictions obtained through various dimension reduction methods outperform both the benchmark AR and the diffusion index model without pre-selected indicators. Moreover, forecast combination significantly reduces forecast error.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Girardi, Alessandro
Golinelli, Roberto
Pappalardo, Carmine
Keywords
Euro Area GDP forecasts, Bridge and Factor Models, Indicators' selection and pre-screening, Forecasting ability
Subjects
ISSN
2282-6483
DOI
Deposit date
15 Jan 2014 09:05
Last modified
10 Feb 2014 10:47
URI

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