Confidence Matters for Nowcasting GDP: Euro Area and U.S. Evidence from a PMI-Based Model

27 Pages Posted: 18 Nov 2011

See all articles by Gabe de Bondt

Gabe de Bondt

European Central Bank (ECB)

Stefano Schiaffi

Bank of Italy

Date Written: November 17, 2011

Abstract

This paper assesses the nowcasting performance of confidence in a one-equation model based on the Purchasing Managers Index (PMI). We look at the interactions between the PMI and confidence and the reasons why confidence affects real GDP growth besides the PMI. Moreover, we explain why our model fits euro area and US data differently. Finally, we test for a possible differential relevance of confidence across the business cycle using a smooth transition model. The results underline that confidence always matters in nowcasting the euro area and the US output, both in good and in bad times.

Keywords: Nowcasting, Survey indicators, Confidence, Smooth transition regression

JEL Classification: E32, E37

Suggested Citation

de Bondt, Gabe and Schiaffi, Stefano, Confidence Matters for Nowcasting GDP: Euro Area and U.S. Evidence from a PMI-Based Model (November 17, 2011). Available at SSRN: https://ssrn.com/abstract=1951869 or http://dx.doi.org/10.2139/ssrn.1951869

Gabe De Bondt

European Central Bank (ECB) ( email )

Eurotower
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49 69 13440 (Phone)
+44 69 1344 6000 (Fax)

Stefano Schiaffi (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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