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
Date Written: June 17, 2008
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: Suggested Citation