Nowcasting GDP with a large factor model space

Beschreibung

We propose a novel time-varying parameters mixed-frequency dynamic factor model which is integrated into a dynamic model averaging framework for macroeconomic nowcasting. Our suggested model can efficiently deal with the nature of the real-time data flow as well as parameter uncertainty and time-varying volatility. In addition, we develop a fast estimation algorithm. This enables us to generate nowcasts based on a large factor model space. We apply the suggested framework to nowcast German GDP. Our recursive out-of-sample forecast evaluation results reveal that our framework is able to generate forecasts superior to those obtained from a naive and more competitive benchmark models. These forecast gains seem to emerge especially during unstable periods, such as the Great Recession, but also remain over more tranquil periods.
steht auch als elektronisches Dokument zur Verfügung (ISBN 978-3-95729-641-2)

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Sercan Eraslan

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