Short-term Forecasts of Euro Area GDP Growth

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

doi:10.2139/ssrn.1275821

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Short-term Forecasts of Euro Area GDP Growth

ECB Working Paper No. 949

31 Pages Posted: 16 Nov 2008

See all articles by Elena Angelini

Domenico Giannone

Centre for Economic Policy Research (CEPR); Amazon.com

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: October 28, 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: Forecasting, Monetary Policy, Factor Model, Real Time Data, Large datasets, News

JEL Classification: E52, C33, C53

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 (October 28, 2008). ECB Working Paper No. 949, Available at SSRN: https://ssrn.com/abstract=1275821 or http://dx.doi.org/10.2139/ssrn.1275821