Nowcasting Finnish GDP Growth Using Financial Variables: A Midas Approach

Journal of the Finnish Economic Association, 2 (1), 74-108, 2021

35 Pages Posted: 6 Dec 2021 Last revised: 10 Dec 2021

See all articles by Olli-Matti Laine

Olli-Matti Laine

Bank of Finland

Annika Lindblad

affiliation not provided to SSRN

Date Written: November 28, 2021

Abstract

We analyse the performance of financial market variables in nowcasting Finnish quarterly GDP growth. In particular, we assess if prediction accuracy is affected by the sampling frequency of the financial variables. Therefore, we apply MIDAS models that allow us to nowcast quarterly GDP growth using monthly or daily data without temporal aggregation in a parsimonious way. We find that financial market data nowcasts Finnish GDP growth relatively well: nowcasting performance is similar to industrial production, but financial market data is available much earlier. Our results suggest that the sampling frequency of financial market variables is not crucial: nowcasting accuracy of daily, monthly and quarterly data is similar.

Keywords: MIDAS, Nowcasting, Financial markets, GDP

JEL Classification: E44, G00, E37

Suggested Citation

Laine, Olli-Matti and Lindblad, Annika, Nowcasting Finnish GDP Growth Using Financial Variables: A Midas Approach (November 28, 2021). Journal of the Finnish Economic Association, 2 (1), 74-108, 2021, Available at SSRN: https://ssrn.com/abstract=3973878

Olli-Matti Laine (Contact Author)

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Annika Lindblad

affiliation not provided to SSRN

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