Short-Term Forecasting of GDP Using Large Monthly Datasets – A Pseudo Real-Time Forecast Evaluation Exercise

National Bank of Belgium Working Paper No. 133

31 Pages Posted: 3 Oct 2010

See all articles by Karim Barhoumi

Karim Barhoumi

University of Angers - Research Group in Quantitative Saving (GREQAM)

Szilard Benk

European Central Bank (ECB)

Riccardo Cristadoro

Bank of Italy

Ard den Reijer

Sveriges Riksbank - Monetary Policy

Audrone Jakaitiene

Vytautas Magnus University

Piotr Jelonek

European University Institute

Antonio Rua

Bank of Portugal - Economic Research Department

Gerhard Rünstler

European Central Bank

Karsten Ruth

J. W. Goethe University Frankfurt

Christophe Van Nieuwenhuyze

National Bank of Belgium

Date Written: June 17, 2008

Abstract

This paper evaluates different models for the short-term forecasting of real GDP growth in ten selected European countries and the euro area as a whole. Purely quarterly models are compared with models designed to exploit early releases of monthly indicators for the nowcast and forecast of quarterly GDP growth. Amongst the latter, we consider small bridge equations and forecast equations in which the bridging between monthly and quarterly data is achieved through a regression on factors extracted from large monthly datasets. The forecasting exercise is performed in a simulated real-time context, which takes account of publication lags in the individual series. In general, we find that models that exploit monthly information outperform models that use purely quarterly data and, amongst the former, factor models perform best.

Keywords: Bridge models, Dynamic factor models, real-time data flow

JEL Classification: E37, C53

Suggested Citation

Barhoumi, Karim and Benk, Szilard and Cristadoro, Riccardo and den Reijer, Ard and Jakaitiene, Audrone and Jelonek, Piotr and Rua, Antonio and Rünstler, Gerhard and Ruth, Karsten and Nieuwenhuyze, Christophe Van, Short-Term Forecasting of GDP Using Large Monthly Datasets – A Pseudo Real-Time Forecast Evaluation Exercise (June 17, 2008). National Bank of Belgium Working Paper No. 133. Available at SSRN: https://ssrn.com/abstract=1685265 or http://dx.doi.org/10.2139/ssrn.1685265

Karim Barhoumi (Contact Author)

University of Angers - Research Group in Quantitative Saving (GREQAM) ( email )

Centre de la Vieille Charité
2, rue de la Charité
Marseille, 13002
France

Szilard Benk

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Riccardo Cristadoro

Bank of Italy ( email )

Via Nazionale 91
Servizio Studi
00184 Roma
Italy
+39 06 4792 3341 (Phone)
+39 06 4792 3720 (Fax)

Ard den Reijer

Sveriges Riksbank - Monetary Policy ( email )

SE-103 37 Stockholm
Sweden

Audrone Jakaitiene

Vytautas Magnus University ( email )

S. Daukanto 28
LT-3000, Kaunas, LT- 44254
Lithuania

Piotr Jelonek

European University Institute ( email )

Villa San Paolo
Via della Piazzuola 43
50133 Florence
Italy

Antonio Rua

Bank of Portugal - Economic Research Department ( email )

R. do Ouro, 27
Lisboa, 1100-150
Portugal

Gerhard Rünstler

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Karsten Ruth

J. W. Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Christophe Van Nieuwenhuyze

National Bank of Belgium ( email )

Research Department
Boulevard de Berlaimont 14
B-1000 Brussels, 1000
Belgium

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