Survey Data as Coincident or Leading Indicators
Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 3
33 Pages Posted: 1 Jul 2009
Date Written: May 3, 2009
In this paper we propose a monthly measure for the euro area Gross Domestic Product (GDP) based on a small scale factor model for mixed frequency data, featuring two factors: the first is driven by hard data, whereas the second captures the contribution of survey variables as coincident indicators. Within this framework we evaluate both the in-sample contribution of the second survey-based factor, and the short term forecasting performance of the model in a pseudo-real time experiment. We find that the survey-based factor plays a significant role for two components of GDP: Industrial Value Added and Exports. Moreover, the two factor model outperforms in terms of out of sample forecasting accuracy the traditional autoregressive distributed lags (ADL) specifications and the single factor model, with few exceptions for Exports and in growth rates.
Keywords: Survey data, Forecasting, Temporal Disaggregation, Dynamic factor modes, Kalman Filter and smoother
JEL Classification: E32, E37, C53
Suggested Citation: Suggested Citation