Short-Term Forecasts of Euro Area GDP Growth

Angelini, Elena; Camba-Mendez, Gonzalo; Giannone, Domenico; Reichlin, Lucrezia; Rünstler, Gerhard

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Short-Term Forecasts of Euro Area GDP Growth

CEPR Discussion Paper No. DP6746

25 Pages Posted: 10 Jun 2008

See all articles by Elena Angelini

Domenico Giannone

International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

London Business School; Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR); European Central Bank (ECB)

Gerhard Rünstler

European Central Bank

There are 2 versions of this paper

Date Written: March 1, 2008

Abstract

This paper evaluates models that exploit timely monthly releases to compute early estimates of current quarter GDP (now-casting) in the euro area. We compare traditional methods used at institutions with a new method proposed by Giannone, Reichlin and Small, 2005. The method consists in bridging quarterly GDP with monthly data via a regression on factors extracted from a large panel of monthly series with different publication lags. We show that bridging via factors produces more accurate estimates than traditional bridge equations. We also show that survey data and other 'soft' information are valuable for now-casting.

Keywords: Factor Model, Forecasting, Large data-sets, Monetary Policy, News, Real Time Data

JEL Classification: C33, C53, E52

Suggested Citation: Suggested Citation

Angelini, Elena and Camba-Mendez, Gonzalo and Giannone, Domenico and Reichlin, Lucrezia and Rünstler, Gerhard, Short-Term Forecasts of Euro Area GDP Growth (March 1, 2008). CEPR Discussion Paper No. DP6746, Available at SSRN: https://ssrn.com/abstract=1141652